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.


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Dereck

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May 29 2011 at 12:43 AM Report abuse rate up rate down Reply
thedtecter

Another surprise drop in the unemployment rate!!! The UE extensions that took the benefit period up to 99 weeks was a buyoff to keep the vast majority of the unemployed quiet. Most of those people would be protesting like the WI public sector if their UE compensation was held to 26 weeks like it used to be. I would bet that the private-sector unemployed would have run the public-sector protestors off the streets and out of their state if the current benefit priod was not in place. I have been in the UE line and have family members there now, but the extension period is ridiculous and no one at the federal level is doing anything to correct the situation.

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Al's 64 vette

As I said 5 years ago, big oil will kill our Country's economy with every penny increase at the pump. If we don't vote for a cap on a gallon of fuel, we are in for a rough time forever! The dribbling effect will start by summer, prices will climb higher than ever, and we will be so far under that we'll never be able to recover. We'd better stop this big oil greed, and oil speculation in the market now! Or...no there is no more or's!

March 05 2011 at 10:44 PM Report abuse +1 rate up rate down Reply
1 reply to Al's 64 vette's comment
bggdg

Vote for a cap on a gallon of fuel? You mean if someone else passes a law that prohibits you from paying more than some specific predetermined amount for fuel, such legislation will keep you from paying more than the predetermined rate even though you are incapable of keeping yourself from doing so absent the law?

March 06 2011 at 9:42 AM Report abuse -1 rate up rate down Reply
delawarejack

Oh the mindless brutality of watching those legions of lap dogs of the liberal, left wingnut media of this country who purposely obfuscate, fake polls and generally pretty much lie their A**es off when it comes to telling the truth about just how damaged & desperate economic conditions truly are in this country & just how precipitously economic conditions will continue deteriorating on a daily basis ......... all in the name of saving the presidency of this absolutely,positively worst & most dangerous morally and intellectually corrupt US president of all time .....

March 05 2011 at 4:27 PM Report abuse +1 rate up rate down Reply
1 reply to delawarejack's comment
bggdg

The truth is that an economy that still retains some aspects of capitalism is one that is ultimately quite resilient against the attacks of the political class.

March 06 2011 at 9:45 AM Report abuse rate up rate down Reply