May 5 (Bloomberg) -- U.S. stocks fell after General Motors Corp. and Ford Motor Co., the nation's biggest carmakers, had their credit ratings cut to junk by Standard & Poor's.

Some investors also held back from buying shares before tomorrow's monthly job report.

The Standard & Poor's 500 Index slipped 3.39, or 0.3 percent, to 1172.26 as of 12:56 p.m. in New York. The Dow Jones Industrial Average, which lost 39.61, or 0.4 percent, to 10,345.03. The Nasdaq Composite Index fell 0.91, or 0.1 percent, to 1961.32.

Both the S&P 500 and Dow average yesterday closed at three- week highs. Benchmark indexes are down for the year amid concern that higher interest rates will slow economic and profit growth more than expected. The S&P 500 has dropped 3.1 percent in 2005.

About the same number of stocks were up and down on the New York Stock Exchange. Some 807 million shares changed hands on the Big Board, 11 percent less than the same time a week ago.

A measure of auto-related shares slumped 3.1 percent for the steepest decline among the S&P 500's 24 industry groups.

GM had the steepest drop in the Dow average, falling $1.06, or 3.2 percent, to $31.74. S&P cut the automaker's credit rating to junk. The shares yesterday jumped 18 percent, the largest advance since at least 1961, after billionaire Kirk Kerkorian disclosed he is building a stake in GM.

Ford dropped 55 cents, or 5.4 percent, to $9.61 after its credit rating was cut to junk by S&P nine minutes after GM was downgraded.

Jobs Report

Investors such as David Spika are looking to tomorrow's job report as an indication of how much the Federal Reserve may boost borrowing costs. U.S. employers probably added 174,000 workers to payrolls, up from an eight-month low of 110,000 in March, according to the median estimate of economists in a Bloomberg News survey.

``The market would probably want to see nothing higher than 200,000, because that would indicate the Fed will continue to be aggressive,'' said Spika, who helps manage $4 billion at Westwood Holdings Group Inc. in Dallas.

The Fed this week lifted the benchmark interest rate a quarter point for an eighth straight time to 3 percent, the highest since September 2001.

Today, the Labor Department said jobless claims rose to 333,000 last week from 322,000. In a separate report, it said productivity, a measure of work per hour, rose at a 2.6 percent annual rate last quarter, more than the 1.8 percent median estimate of economists in a Bloomberg News survey. That compares with a 2.1 percent gain in the last three months of 2004.

To contact the reporter on this story: Ari Levy in New York at alevy5@bloomberg.net.

Last Updated: May 5, 2005 12:58 EDT