Stocks fall as jobs data stirs fear about economy
Tim ParadisStocks lost ground for a second straight session Friday following a worrisome reading on the nation's job market but pulled off of steep losses as investors looked for bargains in beaten down sectors like financials and consumer staples.
The Labor Department said payrolls shrank by 84,000 last month, more than the 75,000 economists predicted, and higher than the 51,000 jobs lost in July. The unemployment rate rose to a five-year high of 6.1 percent from 5.7 percent.
The report confirmed Wall Street's fears that the economy continues to weaken. The nation has lost nearly 550,000 jobs so far this year, eroding investors' hopes for a late-year recovery.
"This was an ugly number that pretty much confirms that our economy continues to trend downward," said Jack Ablin, chief investment officer of Harris Private Bank. "I had thought things were stabilizing, and this just knocks the legs out of any hope of seeing much economic improvement right now."
In early afternoon trading, the Dow Jones industrial average fell 21.33, or 0.19 percent, to 11,166.90; the blue chips had been down 150 points at their lows of the session.
Broader stock indicators also fell. The Standard & Poor's 500 index slid 5.15, or 0.42 percent, to 1,231.68, and the Nasdaq composite index fell 14.36, or 0.64 percent, to 2,244.68.
Stocks turned in a dismal performance on Thursday, with all three major indexes moving back into bear market territory, defined as a 20 percent drop from a recent peak. The Dow plunged more than 340 points in a sell-off underpinned by disappointing economic news and lackluster sales reports from retailers.
Bond prices were mostly steady Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was flat at 3.62 percent from late Thursday.
"Since mid-July I think it's become apparent that the global economies have really weakened pretty sharply," said Thomas J. Lee, U.S. equities strategist at J.P. Morgan in New York. He said that while investors had been applauding the drop in oil prices since then, there was an assumption that lower commodities prices would hasten a recovery in the U.S. economy. Now, he said, investors are worried that the economy might be weakening even as oil falls.
"It's disinflation coupled with an accelerating downside in the economy. That's not what people were prepared for. I think people were expecting disinflation as an economic recovery was under way," Lee said. "The surge in unemployment today really underscores that fear."
As it had earlier in the week, Wall Street found little comfort from falling oil. Crude at one point dropped below $106 a barrel Friday as the dollar continued to gain on the euro and investors waited to see whether OPEC moves to restrict output next week following a two-month plunge in prices. The Organization of the Petroleum Exporting Countries is scheduled to meet early next week in Vienna and has indicated it may take action to defend the $100-a-barrel level.
Light, sweet crude fell $2.07 to $105.82 a barrel on the New York Mercantile Exchange.
Among financials carving out advances, Citigroup Inc. rose 38 cents, or 2.1 percent, to $18.68, while Bank of America Corp. rose 69 cents, or 2.3 percent, to $31.29. Wachovia Corp. rose 60 cents, or 3.9 percent, to $16.13.
In the consumer staples sector, smokeless tobacco maker UST Inc. surged following a report from The New York Times that Altria Group Inc. plans to acquire the company. Altria, parent of Marlboro maker Philip Morris USA, dismissed the report as "pure speculation." Nonetheless, UST, the maker of Skoal and Copenhagen brands, jumped $11.57, or 21 percent, to $65.57, while Altria rose 24 cents to $20.90.
Energy names fell as oil continued its slide. Chevron Corp. declined $1.67, or 2.1 percent, to $79.55, while ConocoPhillips fell $1.88, or 2.5 percent, to $74.60.
Declining issues outnumbered advancers by about 5 to 2 on the New York Stock Exchange, where volume came to 610.1 million shares.
The Russell 2000 index of smaller companies fell 9.52, or 1.32 percent, to 709.10.
And the gloom about the U.S. economy was not contained to just major American indexes. Investors overseas sent shares sharply lower on concerns about America's effect on global growth.
Japan's Nikkei stock closed down 2.75 percent. In Europe, Britain's FTSE 100 fell 2.26 percent, Germany's DAX index dropped 2.42 percent, and France's CAC-40 shed 2.49 percent.
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