Stocks drop on weaker job numbers
NEW YORK -- Wall Street fell sharply Friday after the government's much-anticipated employment report showed weaker-than-expected job growth and a rise in the unemployment rate.
The Nasdaq composite index, also pummeled by a downgrade of Intel Corp., skidded more than 3.5 percent, while the Dow Jones industrials fell more than 1.5 percent.
The Labor Department's report that employers raised payrolls by only 18,000 and that the nation's unemployment rate rose to its highest level since November 2005 unnerved investors, who worried that a weakening job market will hurt consumer spending and tip the economy toward recession.
A better-than-expected reading on the nation's service economy briefly pulled stocks off their lows but wasn't enough to shake investors' concerns.
Manufacturers, construction companies and financial services companies all cut jobs during the month amid an anemic housing market. Retailers also made reductions.
A Federal Reserve announcement Friday that it is ramping up the amount of cash available to banks through a new auction process did little to calm the markets. After two auctions of $20 billion each, the Fed has now scheduled auctions Jan. 14 and Jan. 28 at $30 billion each.
The Dow fell 256.54, or 1.96 percent, to 12,800.18, while the Standard & Poor's 500 index declined 35.53, or 2.46 percent, to 1,411.63.
The technology-focused Nasdaq fell for the sixth straight session and showed its steepest percentage decline since a market pullback on Feb. 27 last year. The Nasdaq declined 98.03, or 3.77 percent, to 2,504.65, in part after the downgrade of Intel, but also because its smaller-capitalization components are seen as more vulnerable in an economic slowdown.
For 2008, the Nasdaq is down 5.57; in all of 2007, the index rose 9.81 percent.
It's been a difficult start to 2008 on Wall Street. After selling off in the final session of last year on Monday, investors spent the first three sessions of the new year absorbing a weaker-than-expected reading on the manufacturing sector, oil that reached $100 a barrel and Friday's dismal employment numbers.
"It's hard to point to any piece of data in recent weeks that makes you feel comfortable," said Joe Balestrino, senior portfolio manager at Federated Investors, noting that many bullish investors had hoped a strong jobs picture would lift Wall Street's mood.
"This the one piece that was holding up pretty well and now it's showing some weakness as well," he said. "In our business it's not the absolute number, it's the direction of the number and especially the direction versus the expectations."