Dow Jones falls 250 points
NEW YORK -- Wall Street plunged while bonds surged higher Friday after the government reported payrolls in August fell for the first time in four years.
The Dow Jones industrial average fell nearly 250 points.
Wall Street had been awaiting the report all week as it sought to determine how well the economy was holding up under the weight of a faltering housing market, a rise in mortgage defaults and tightening availability of credit.
"This certainly cements the case for a Fed action at the next meeting," said Zach Pandl, economist at Lehman Brothers Holdings Inc. '. The debate has really become about whether it will be 25 or 50 basis points."
The Dow fell 249.97, or 1.87 percent, to 13,113.38.
Broader stock indicators also skidded. The Standard & Poor's 500 index fell 25.00, or 1.69 percent, to 1,453.55, and the Nasdaq composite index fell 48.62, or 1.86 percent, to 2,565.70.
The three major indexes, though still in positive territory for the year, all finished the week down more than 1 percent.
Bonds, meanwhile, soared following the jobs report as investors sought safety.
The yield on the benchmark 10-year Treasury note, which moves inversely to its price, skidded to 4.37 percent from 4.51 percent late Thursday.
The dollar fell sharply following the report, as the likelihood of an interest rate cut appeared to increase.
Dollar-based assets would earn less interest if the Fed were to cut rates.
In addition, gold prices rose sharply because some investors would be expected to abandon a weakening dollar and move into gold if the central bank lowers rates.
Comments from one former Fed official -- former Chairman Alan Greenspan -- perhaps added to Wall Street's unease Friday.
The Wall Street Journal reported the former Fed chairman on Thursday told a group of economists in Washington that the recent market turmoil is similar to that of 1987, when the Black Monday crash occurred.
He also mentioned 1998, when the big hedge fund Long-Term Capital Management came close to collapsing.
Greenspan's comments come about a month ahead of the 20th anniversary of the stock market's crash on Oct. 19, 1987.