Stocks give up steep gains that followed economic figures

Still, buyers narrowly outnumbered sellers after a government employment report showed the nation's employers cut far fewer jobs than expected last month, stirring optimism about the buoyancy of the economy.

A separate report showing that factory orders increased in March following two months of declines helped boost investors' enthusiasm. However, a surprise loss from Sun Microsystems Inc. weighed on the tech-laden Nasdaq composite index.

The better-than-expected employment report came days after the Federal Reserve lowered interest rates by a quarter point and hinted it could stand pat at future meetings a move that could help shore up an anemic dollar and combat worrisome inflation.

The Labor Department's report that employers cut 20,000 jobs in April was a relief to Wall Street, which had been expecting payrolls to fall by 70,000 jobs. The unemployment rate fell to 5 percent from 5.1 percent. This marked the fourth straight month of job losses, but the data signaled that perhaps the economy might be resisting falling into recession.

The Commerce Department said Friday that U.S. manufacturers saw orders increase 1.4 percent in March. Economists expected a 0.2 percent increase after declines in January and February.

Meanwhile, the Fed said it will work with European central banks to expand efforts to deal with the global credit crisis. The central bank will boost the amount of emergency reserves it supplies to U.S. banks to $150 billion in May, up from the $100 billion it supplied in April.

Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams, said stocks pulled back from the day's highs as investors locked in gains following a decent run-up.

"This is just normal profit-taking," he said, adding: "Sun Microsystem's earnings today didn't help the cause."

In early afternoon trading, the Dow Jones industrial average fell 8.14, or 0.06 percent, to 13,001.86 after being up more than 100 points earlier in the session.