Wall Street fell sharply again today after the government’s much-anticipated employment report showed weaker-than-expected job growth and a rise in the unemployment rate. The Nasdaq composite index, also pummeled by a downgrade of Intel Corp., skidded more than 3.5%, while the Dow Jones industrials fell more than 1.5%.

The Labor Department’s report that employers raised payrolls by only 18,000 and that the nation’s unemployment rate rose to its highest level since November 2005 unnerved investors, who worried that a weakening job market will hurt consumer spending and tip the economy toward recession.

A better-than-expected reading on the nation’s service economy briefly pulled stocks off their lows but wasn’t enough to shake investors’ concerns.

Investors had been awaiting the jobs report for weeks as they tried to determine whether the economy would continue to benefit from robust consumer spending even as sectors like home construction, mortgage writing and manufacturing slow. Wall Street is concerned that areas of weakness could puncture growth if consumers can’t depend on a solid job market.

Manufacturers, construction companies, and financial services companies all cut jobs during the month amid an anemic housing market. Retailers also made reductions.

The December report showed employers added the fewest jobs to their payrolls since August 2003. Economists had predicted a jobs growth figure of about 70,000 and an unemployment rate of 4.8%. Instead, unemployment climbed to 5% in December from 4.7% in November. While 5% unemployment is still considered good by historical standards, the increase from November clearly made some investors nervous.

“It’s a scary number, no question about it. No matter how good you wanted to feel about the economy averting a recession, there is far less conviction than even two or three days ago,” a senior portfolio manager at Federated Investors, Joe Balestrino, said.

According to preliminary calculations, the technology-focused Nasdaq fell for the sixth straight session and showed its steepest percentage decline since a market pullback on February 27 last year. The Nasdaq declined 98.03, or 3.77%, to 2,504.65, in part after the downgrade of Intel, but also because its smaller-capitalization components are seen as more vulnerable in an economic slowdown.

The Dow fell 256.54, or 1.96%, to 12,800.18, while the Standard & Poor’s 500 index declined 35.53, or 2.46%, to 1,411.63.

It was the steepest point drop for the Dow and the S&P 500 since December 11.

The Russell 2000 index of smaller companies fell 23.44, or 3.14%, to 721.57 and hit a fresh 52-week low.

Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.65 billion shares, compared with 1.32 billion traded yesterday.

Bond prices rose as investors sought the safety of government-backed debt after the employment reading. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.87% from 3.89% late yesterday.

A Federal Reserve announcement today that it is ramping up the amount of cash available to banks through a new auction process did little to calm the markets. After two auctions of $20 billion each, the Fed has now scheduled auctions January 14 and January 28 at $30 billion each.

The dollar was mixed against other major currencies. Gold prices, which have risen to nearly 30-year highs in recent days, declined.

Light, sweet crude fell $1.27 to settle at $97.91 a barrel on the New York Mercantile Exchange. Oil touched $100 a barrel this week for the first time, stirring concerns about inflation.