Stock prices sold off sharply in a convulsive session Friday as the market reacted to Middle East oil worries and mounting recession fears. The Dow Jones average of 30 industrials, down more than 120 points at its midsession low, closed with a 54.95-point loss at 2,809.65. Declining issues outnumbered advances by more than 5 to 1 in nationwide trading of New York Stock Exchange-listed stocks, with 264 up, 1,457 down and 305 unchanged. Volume on the floor of the Big Board reached a 1990 high of 292.36 million shares, against 253.09 million in the previous session. Selling also pounded the over-the-counter market, where technology stocks showed steep losses. The Labor Department reported Friday morning that nonfarm payroll employment fell by 219,000 in July, surprising analysts who had been looking for a modest increase. The civilian unemployment rate jumped three-tenths of a percentage point, to 5.5 percent. Those figures reinforced concern in the financial world that economic activity was weakening more than had been thought just a few weeks ago. Many observers fear the economy's problems could be compounded by a jump in oil prices arising from Iraq's invasion of Kuwait this week. Selling intensified as reports reached Wall Street that Iraqi forces were near the border of Saudi Arabia. It subsequently let up a bit when a Soviet official said Iraq was expected to withdraw from Kuwait in the near future. After the close in New York, Iraq confirmed that it planned to begin pulling back forces from Kuwait on Sunday. The session marked the second time in the last two weeks that the Dow fell more than 100 points intraday before recovering some of its loss. On July 23 the average plummeted in the first hour, then finished with a net deficit of 56.44 points. Among the blue chips, International Business Machines dropped 1| to 108&lsqb;; Procter & Gamble 2\ to 80; General Motors { to 43&rsqb;; General Electric ~ to 69}, and American Express \ to 27}. In the energy sector, by contrast, prominent oil issues climbed in early trading and then turned back. Exxon dropped &lsqb; to 53&lsqb;; Texaco 1\ to 64|, and Mobil &rsqb; to 66~ even as oil prices kept climbing. In the over-the-counter market, Apple Computer fell 2\ to 41\; MCI Communications 1 to 35}, and Intel 1 to 39\. Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 345.20 million shares. As measured by Wilshire Associates' index of more than 5,000 actively traded stocks, the market lost $66.55 billion, or 1.99 percent, in value. The NYSE's composite index of all its listed common stocks dropped 3.54 to 188.82. Standard & Poor's industrial index fell 8.23 to 407.06, and S&P's 500-stock composite index was down 6.62 at 344.86. The NASDAQ composite index for the over-the-counter market tumbled 11.43 to 417.46. At the American Stock Exchange, the market value index closed at 346.63, down 5.52.