Dismal Job Market Pushes Dow into 275-Point Plunge

Dismal job market pushes Dow into 275-point plungeBy DANIEL WAGNER, AP Business Writer

The stock market suffered its worst day of the year Friday after a surprisingly weak report about hiring and employment cast a pall of gloom over the U.S. economy. The Dow Jones industrial average plunged 275 points.

Traders stampeded into the safety of bonds, pushing the yield on the benchmark 10-year Treasury note to a record low. Fearful investors bought gold, causing the price to spike $50 an ounce, and concern about a global economic slowdown drove the price of oil to its lowest since October.

"The big worry now is that this economic slowdown is widening and accelerating," said Sam Stovall, chief equity strategist at S&P Capital IQ, a market research firm.

It was the Dow's steepest one-day drop since November.

The Standard & Poor's 500 index and Nasdaq composite index both fell more than 3 percent. The Nasdaq has dropped more than 10 percent since its peak - what traders call a market correction. The S&P 500 is just a point above correction territory.

American employers added just 69,000 jobs in May, the fewest in a year, and the unemployment rate increased to 8.2 percent from 8.1 percent. Economists had forecast a gain of 158,000 jobs.

The report, considered the most important economic indicator each month, also said that hiring in March and April was considerably weaker than originally thought.

Earlier data showed weak economic conditions in Europe and Asia, too. Unemployment in the 17 countries that use the euro currency stayed at a record-high 11 percent in April, and unemployment spiked to almost 25 percent in Spain.

There were signs that growth in China, which helped sustain the global economy through the recession, is slowing significantly. China's manufacturing weakened in May, according to surveys released Friday.

The Dow closed down 274.88 points, or 2.2 percent, at 12,118.57. The Dow is off 0.8 percent for the year; two months ago, it was up more than 8 percent for the year.

The Standard & Poor's 500 index fell 32.29 points, or 2.5 percent, to 1,278.04. The Nasdaq dropped 79.86, or 2.8 percent, to 2,747.48. Both indexes are still up for the year - 1.6 percent for the S&P 500 and 5.5 percent for the Nasdaq.

Traders sold all types of risky investments and rushed to the safety of U.S. government bonds and gold. Bond prices rose sharply, briefly pushing the yield on the benchmark 10-year U.S. Treasury note down to 1.44 percent, the lowest on record. The yield ended the day at 1.46 percent.

Gold for August delivery climbed $57.90, nearly 4 percent, to $1,622.10 per ounce.

"Everybody's looking for a safe haven," said Adam Patti, CEO of IndexIQ, an asset management firm. He's skeptical of that strategy, believing the swing was driven by short-term traders "looking to flip in and out of things," rather than long-term investors willing to ride out a few bumps in the market.

May was the worst month for the stock market in two years by some measures. Investors' worries about Europe's debt crisis intensified as the month wore on. Greece's political future is uncertain, and it appears increasingly likely to stop using the euro currency. That could rattle financial markets and make Greece's economy - already hobbled - even weaker.

Friday's jobs report drew traders' attention back to the weakening U.S. economy, said Todd Salamone, director of research for Schaeffer's Investment Research in Cincinnati.

"The weaker jobs report translates into anticipation of slower growth ahead and weaker corporate earnings, and that ratchets stock prices lower," Salamone said.

The record-low yield on the 10-year Treasury note reflected rapid buying by traders with the biggest portfolios, including central banks, endowments and pension funds, said Ira Jersey, U.S. interest rate strategist at Credit Suisse. He said money managers were selling investments priced in euros and stashing their money in U.S. securities.

Several analysts raised the possibility that the weakening economy will prompt more action by governments and central banks seeking to juice global economic activity. Anticipation of some policy response prevented even deeper losses, Stovall said.

The Federal Reserve undertook programs in 2009 and 2010 to buy U.S. government bonds. Its goal was to lower interest rates and encourage people to buy riskier investments like stocks. At least in public, the central bank so far has resisted a third round of purchases, known as quantitative easing.

Anticipation of bond-buying by the Fed "might put in a little bit of a floor to the market, but the overall economic picture is still bad," said Bob Gelfond, CEO of MQS Asset Management, a New York hedge fund.

The dollar fell partly because traders expect more intervention by the Federal Reserve, Gelfond said.

The euro rose half a penny against the dollar to above $1.24. A day earlier, fears about Europe's finances had pushed the euro to a nearly two-year low against the dollar.

Only 17 of the 500 companies in the S&P index were higher for the day.

Homebuilder stocks fell the most, despite a report that construction spending rose for a second month in April. PulteGroup fell 11.8 percent, D.R. Horton 8.4 percent and Lennar 8.3 percent.

Boeing, the biggest U.S. exporter, fell 3.4 percent, one of the biggest declines among the 30 companies that make up the Dow. Traders fear that the economic slowdown will hurt global demand for its airplanes and defense technologies.

A slower global economy would reduce demand for energy. The price of a barrel of oil fell $3.49 to $83.04, extending a monthlong slide. The price of oil is at a 16-month low.

Stocks closed way down in Europe. Greece's benchmark stock index fell 4.4 percent, Germany's 3.4 percent and France's 2.2 percent.

___

AP business writers Matthew Craft, Joseph Pisani and Christina Rexrode in New York contributed to this report.

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dmpolis

If the congress of the USA would start to get bills passed for jobs programs and stop playing politics with our nations future we could be closer to being out of this mess. but the GOP is out for one thing ,make Obama a one term president. It has been the objective of this party since Obama was elected. If this were a Dictatorship this wouldn't happen but the Executive branch of the government is subjected to the system of checks and ballance which can put the legislative branch in a position of obstruction. They have shut out many bills that would have prompted jobs but instead focused on bills about women's health and gays. Both parties are not screwed up. the GOP is determined to stop Obama infavor of big business and the rich.

June 04 2012 at 9:55 AM Report abuse -1 rate up rate down Reply
infinitycj

You guys that call this a "Democratic Mess" are just as guilty, both parties will see this country crash just to stay in power. Both parties have had their chance, they have entertained you while making deals behind closed doors. They have a plan that includes a lesser life style, fewer jobs, less money and power for the masses.
Both "parties" are so screwed up it makes the 5% that know better sick!

June 04 2012 at 8:02 AM Report abuse -1 rate up rate down Reply
dnvrsteve

you conservatives are sooooo stupid, the economy was great until
baby bush got in and destroyed the US, anyone who supports republicans in any way deserves to suffer and starve, No one can fix what he did in 4 years, so vote republican again YOU JUSY CAN'T learn, can you

June 04 2012 at 3:42 AM Report abuse -1 rate up rate down Reply
2 replies to dnvrsteve's comment
balticstein

Nice try but Bush is no longer in office, I'd say this is Obama's fault

June 04 2012 at 7:14 AM Report abuse -1 rate up rate down Reply
Robert

Face it Steve. BO has been at the helm for 3-1/2 years. There has to be some accountability.
No one wants to give his pitiful performance a 2nd chance. One and done.

June 04 2012 at 8:48 AM Report abuse +1 rate up rate down Reply
Hi Susan

Obama, who never decided he wanted to be president of the United States, just jets around; charges people $30,000 for dining with him; and pukes at anyone he does not like. He is a nasty speaker - he is not nice; he is a bad influence for our kids. He wastes BIG OIL every day with his trips while refusing to put 200,000 to work on the KeyStone Pipeline.

If you care about jobs, then we must vote Obama out - as he only cares about his own job. He can take his smiley wife with him, who is a bit nicer than him, but still corrupt with her lavish traveling.

June 03 2012 at 11:33 PM Report abuse +3 rate up rate down Reply
1 reply to Hi Susan's comment
dmpolis

The problem with these posts is there are uneducated people writing them and
uninformed as well . Keystoine will create about 6 thousand temp jobs. Second Obama is not harmful to kids he is very fair. Obama for 2012.

June 04 2012 at 10:03 AM Report abuse -1 rate up rate down Reply
wapitibowhunters

Get rid of Obumma, the great divider and see how fast the economy bounces back.

June 03 2012 at 11:15 PM Report abuse +3 rate up rate down Reply
wapitibowhunters

Obumma has been on the attack against big business and wall street for 4 yrars and you wonder why jobs are not being produced. These companies are sacred of Obumma and will not take the chance of expanding till he is gone and Obummacare is repealed.

June 03 2012 at 11:11 PM Report abuse +3 rate up rate down Reply
1 reply to wapitibowhunters's comment
dmpolis

You would like Health care removed! How would you also like SS, Medicare and education removed. How would you like to still be fighting two wars. Big business must be controlled and thre banks must have regulation. I am sick of working hard to save a little money and have big banks crash and take it all away. The vanishing middle class supports this country and the rich get a free pass.You must be part of the 1% .

June 04 2012 at 10:08 AM Report abuse rate up rate down Reply
democracks0

Someholes so confused. He forgets that even Obama said we were better off 4 years then we are now. Somehole lives in an Obamite fantasy world.

June 03 2012 at 11:07 PM Report abuse +5 rate up rate down Reply
1 reply to democracks0's comment
democracks0

*better off 4 years ago.......

June 03 2012 at 11:10 PM Report abuse +3 rate up rate down Reply
Condley

If you think last week was bad, just wait until this week is over!

June 03 2012 at 11:07 PM Report abuse +2 rate up rate down Reply
FLAMINGOKID

What happened to the Obama "jaw up" pictures the liberal media had on 24/7?????

June 03 2012 at 10:55 PM Report abuse +4 rate up rate down Reply
Iselin007

Ever notice how people are duped into war but get no jobs because this is the century of greedy SOB's on Wall St and the end.

June 03 2012 at 10:21 PM Report abuse +2 rate up rate down Reply
1 reply to Iselin007's comment
Hi Susan

War is caused and created by Obama - lselin007. Those who work for a living work at companies that make things for Americans such as cars, furniture, clothes, and so forth (yeah - I guess you hate those companies.) Obama is in commander of chief of the country and he wasted 5 trillion dollars on wars that no one wanted -and no one voted for as he won't even let Congress drive rational thought into his idiotic brain. So - lselin007 - I guess you went to one of those schools who did not teach who has the powers and that is Obama. So vote your clown out of office as he hates Americans. _ he might have a US passport, but he would rather give 30 billion dollars to Pakistan, then spend 30 billion dollars on our kids - go figure.

June 03 2012 at 11:36 PM Report abuse +2 rate up rate down Reply