By Kristina Peterson

An unexpected improvement in the U.S. unemployment rate helped soften the U.S. stock market's declines on Friday, though investors' fears about mounting fiscal instability in Europe persisted.

The Dow Jones Industrial Average (DJI) was recently down 53 points, or 0.5%, at 9,948.

General Electric (GE) was the measure's worst performer, down 2.2%.

Kraft Foods (KFT) was also weak, with the company down 1.6% after announcing that its offer for Cadbury PLC (CBY) is now unconditional after getting the approval from shareholders holding 75% of the U.K. chocolate maker's stock.

The Dow's tech components helped keep losses in check, with Intel (INTC) up 1.4%, and Cisco Systems Inc. (CSCO) up 1.5%, extending its gains after posting strong earnings earlier this week.

The Standard & Poor's 500 index (SPX) was down 0.2%, with industrials and energy sectors leading the declines. Financials, tech and materials helped boost the measure. Leading the materials companies, Airgas Inc. (ARG) soared 39% after Air Products & Chemicals (APD) offered $5.1 billion, or $60 a share, for its rival.

The Nasdaq Composite (RIXF) was down 0.1%.

The Dow traded below 10,000 all morning, after falling beneath that level for the first time since November, just before Thursday's close.

The 10,000 level has proven to be one of the most difficult round-number levels for the Dow to maintain in its long history. The blue-chip measure first pierced 10,000 in 1999 and has run to records significantly above it several times.

January jobs

Coming off the previous session's 268-point slide, the Dow's gains stabilized lower on Friday, after the U.S. unemployment rate unexpectedly fell to 9.7% last month from an unrevised 10% in December, according to the Labor Department. Economists had forecast the jobless rate would edge higher to 10.1%.

"It's provided some relief," said Kenneth Polcari, managing director of ICAP Equities. "I think people were a little bit nervous in front of what they thought that number would be."

Anxiety over the instability surrounding European sovereign debt has softened compared to how traders reacted to world markets on Thursday, Polcari said.

"It's very calm here right now," Polcari said from the floor of the New York Stock Exchange. "Yesterday was a little less calm."

Still, the jobs data did not point unequivocally to a strengthening labor market.

Nonfarm payrolls fell by 20,000 compared with a revised 150,000 drop decline in December, with the December figure revised sharply downwards from an originally reported 85,000 drop. The Labor Department's annual benchmark revision to the survey showed that last year job losses were almost 600,000 more than previously reported.

The unemployment rate may have improved because more people gave up their job searches, said Phil Orlando, chief equity maket strategist at Federated Investors. The number of discouraged workers grew to 1.1 million in January, up from 929,000 in December, according to the Labor Department. That makes the unemployment rate likely to pick back up later in the year, he said.

In other markets, the dollar strengthened against both the euro and the yen. Crude oil futures slid below $73 per barrel, while gold futures also slipped. Treasurys edged up, with the 10-year note up 5/32 to yield 3.592%.

Among stocks in focus, health provider Aetna (AET) rose 1.3%, after its fourth-quarter earnings fell 15%, despite prior-year investment losses as the health insurer recorded higher claims and pension costs. Still, analysts said the company's reserves and balance sheet boded well for its stock going forward.

Toyota Motor Corp. (TM) rose 2.5%, after the company's president offered "his heartfelt apology" over braking systems problems, his first press conference since the company was hit by a wave of recalls.