Stocks fell sharply Friday after crude oil prices topped $104 a barrel, overshadowing an encouraging drop in the unemployment rate.
The Dow Jones Industrial Average ($INDU) fell 88 points, or 0.7%, to close at 12,170. The blue-chip index was off as much as 179 points during the session before paring its losses toward the close.
The broader S&P 500 ($INX) lost 10 points, or 0.7%, to finish at 1,321. The tech-heavy Nasdaq Composite ($COMPX) shed 14 points, or 0.5%, to close at 2,785.
For the week, the Dow eked out a gain of 0.3%. The S&P 500 and Nasdaq each added about 0.1% on the week.
A day after logging their best session in three months the equity markets keyed once again on a spike in oil prices. Benchmark crude oil futures traded on the Comex division of the New York Mercantile (CME) rose $2.51, or 2.5%, to settle at $104.42 a barrel, boosted by continuing tension in North Africa and the Middle East. The April crude oil contract shot up 6.7% on the week.
Surprise Drop in Unemployment Rate
Rising energy prices put a damper on February's jobs report, in which the unemployment rate logged a surprise drop to a two-year low of 8.9% from 9%. Economists, on average, expected the jobless rate to tick up to 9.1%. The economy added a net 192,000 jobs last month, while private employers added 222,000 jobs, the most since April.
But Friday's positive jobs data was largely reflected in Thursday's market action, when the Dow jumped nearly 200 points on better-than-expected initial jobless claims, says Kenny Polcari, managing director an interdealer broker ICAP Corporates.
"[The jobs data] were all very positive numbers, but we had a very dramatic move up yesterday," the veteran New York Stock Exchange (NYX) trader says. "Yesterday's macro numbers were perceived as good. Traders were talking it up all week. So today it was almost a sell-the-news situation."
The threat of sustained higher energy costs to the economic expansion are also weighing on traders' minds, Polcari says. As much as the trend in hiring might point to a self-sustaining recovery, Wall Street is mindful of what rising food and gas prices could do consumer spending and corporate profit margins.
"Oil's up a couple bucks-and-change today," Polcari says. "It doesn't give me a warm and fuzzy feeling that we're in a self-sustaining recovery."
For more on Polcari's take from the floor of the NYSE, see the video above.
Why do investors make the decisions that they do?View Course »