Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee, noted that the market held up relatively well through the day despite the early morning Labor Department report of anemic job growth in December.

But late in the day, "investors threw in the towel ... and everyone was taking profits," Berman said.

According to preliminary calculations, the Dow Jones industrial average fell 133.55, or 1.3 percent, to 10,458.89, and the Standard & Poor’s 500 index was off 10.06, or 0.9 percent, at 1,121.86.

The Nasdaq composite index, which had spent much of the day in positive territory, closed down 13.33, or 0.6 percent, at 2,086.92. The decline ended a five-session advance.

Despite today’s performance, all the indexes were up for the week. The Dow advanced 0.5 percent, the S&P rose 1.2 percent and the Nasdaq was up 4 percent.

The markets took little comfort from the Bush administration announcement that it was lowering the national terror alert level to "yellow" from "orange." Homeland Security Secretary Tom Ridge said that an urgent threat had passed.

Before the market opened, the Labor Department said the nation’s unemployment rate dropped to 5.7 percent in December, but that companies added only 1,000 new jobs in an anemic holiday-hiring performance.

Analysts had been expecting a gain of 100,000 to 150,000.

Although December’s unemployment rate was the lowest in 14 months, it reached that level because fewer people were looking for work, the department said. More than 300,000 people gave up their search for jobs and dropped out of the pool of available workers, the department said.

Job creation is watched closely as a measure of the depth of the economic recovery from the 2001 recession and of consumer finances. Consumer spending makes up two-thirds of the economy.

Charles H. Blood Jr., senior financial markets analyst at Brown Brothers Harriman & Co. in New York, said, "the market took the employment report badly at the start."

He noted, however, that the jobs figures were at odds with other reports of economic expansion.

The jobs report also suggests the Federal Reserve is likely to keep interest rates lower longer to stimulate the economy.

The bond market responded strongly to the likelihood that interest rates will remain low, with the yield on the 10-year Treasury note falling to 4.082 percent from 4.25 percent late yesterday.

Shares of International Business Machines Corp. fell a day after the computer hardware company said federal investigators are considering civil charges for accounting rule violations.

IBM said the Securities and Exchange Commission was looking into the transactions as part of a larger probe into Dollar General Corp.’s accounting. The Tennessee-based chain of retail stores has admitted overstating profits by $100 million from 1998 to 2000.

IBM was down $1.83, or nearly 2 percent, at $91.21, while Dollar General dropped 22 cents, or 1 percent, to $21.45.

Meanwhile, downgrades hurt telecommunications stocks.