Dow plunges 275 on disappointing jobs report

Updated: 6:21 p.m. ET

Stocks dropped sharply today, with the Dow Jones Industrial Average ($INDU) going negative for the year, after the Labor Department said the national unemployment rate rose to 8.2% in May and payroll employment growth fell dramatically.

The economy created just 69,000 new jobs in May, down from 77,000 in April and 143,000 in March. The payroll gains were much less than the consensus estimate of 150,000. Worse, the payroll gains for April and March were cut by a total of 49,000 jobs. In a note to clients, Ian Shepherdson, chief U.S. economist of High Frequency Economics, summed up the report in three words: "This is horrible."

There was renewed speculation that the Federal Reserve might try new measures to stimulate the economy, although Chairman Ben Bernanke and others have said they wouldn't move unless the economy shows truly serious deterioration.

It's questionable if today's jobs report meets that standard. The Institute for Supply Management's May index on manufacturing missed estimates slightly but suggested more strength in the economy than the jobs reports indicates. Automakers were reporting decent May sales, although the results were generally below Wall Street estimates.

The Dow closed down 275 points to 12,119. The index ended the day down 0.8% for 2012. The Standard & Poor's 500 Index ($INX) was off 32 points to 1,278; it's still up 1.6% for the year. The Nasdaq Composite Index ($COMPX) was off 80 points to 2,747 but remains up 5.5% for the year. The losses were the third in a row for the indexes and the worst point losses for the Dow and S&P 500 since Nov. 1. The Nasdsq had its biggest loss since Sept. 22.

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The Nasdaq-100 Index ($NDX), meanwhile, was down 66 points to 2,459. The index is heavily influenced by Apple (AAPL), which was down $16.74 to $560.99, subtracting 14 points from the index by itself. Facebook (FB) was down $1.88 to $27.72.

Interest rates were lower, as investors around the world sought safety in bonds. The U.S. 10-year note yield fell to 1.467% from Thursday's 1.58%. The German 10-year bond was yielding 1.172% after falling to as low as 1.172%.

Late today, ratings company Egan-Jones downgraded Italy's credit rating to B+ from BB. It's not clear how much effect the move will have on markets.

Financial stocks are hit
Financial stocks were the weakest sector of the S&P 500, down more than 3.7% overall. All 10 sectors of the index were lower. Bank of America (BAC) was down 33 cents to $7.02. JPMorgan Chase (JPM) dropped $1.22 to $31.93.

Utility stocks were the best performers. The Dow Jones Utility Average ($UTIL) was off just 4 points to 464.

The Dow has now fallen 8.74% since peaking on May 1. The S&P 500 is off 9.94% since its peak of 1,419 on April 2, though it remains up 2.1% for the year. The Nasdaq has dropped 12% since peaking on March 26. Its gain has been cut from 20% to 5.5%. A loss of 10% or more is the popular definition of a correction.

If you look at the declines from intraday highs reached this winter, the S&P 500 and Nasdaq are both in corrections, down 10.1% and 12.3% respectively. The three indexes ended the day below their simple 200-day moving averages, a key measure of investor confidence.

At the same time, the three indexes are oversold if measured by their relative strength indexes. That means a rally could be near -- if the right trigger emerges

Markets for the week
			6/1/2012			5/25/2012			% chg.			YTD chg.
Dow Industrials			12,118.57			12,369.38			-2.03%			-0.81%
S&P 500			1,278.04			1,295.22			-1.33%			1.63%
Nasdaq			2,747.48			2,778.79			-1.13%			5.46%
Russell 2000			737.43			747.21			-1.31%			-0.47%
Crude oil			$83.23			$90.86			-8.40%			-15.78%
(per barrel)
U.S. Dollar Index			82.97			82.52			0.55%			3.04%
10-yr. Treasury			1/0/1900			1/0/1900			-15.93%			-21.59%
Gold			$1,622.10			1,568.90			3.39%			3.53%

Warm weather, Europe and China may be hurting US jobs
Unseasonably warm weather, which brought forward hiring into the winter months, was probably the reason that March and April employment gains proved smaller than originally thought.

May's paltry growth is another question.

Today's jobs report contained a number of worrisome elements. Over the last three months, the economy has added 96,000 jobs a month, compared with 250,000-plus in December, January and February. The average workweek fell slightly; average weekly earnings were up just 0.1%.

The payroll survey -- the one from which the unemployment rate is derived -- was stronger, with total employment up 422,000.

Part-time employment, however, accounted for all of the gain and then some. And the alternative measure of unemployment, which includes the traditional measure plus those who have given up or are working part time because they can't find full-time employment, rose to 14.8% from 14.5% in April. It's still down from 15.4% a year ago.

"While this report hardly qualifies as a disaster, it does confirm that there's a real slowdown under way, and not just some weather-related quirks," said Philippa Dunne and Doug Henwood of the Liscio Report, a newsletter that tracks state finances.

What's not clear is the cause. Most economists believe it is worry that Europe's worsening problems will spill over to this country.

"Some had believed that we had decoupled from China slowing and all the problems in Europe, but that seems to be short-sighted," Malcolm Polley, president and chief investment officer of Stewart Capital Advisors in Indiana, Pa., told Reuters.

The report came as stocks in Europe plunged after the European Union's statistics service said unemployment in the eurozone nations hit 11%.

Manufacturing activity declined across the continent, with activity in Spain, France, Greece and even Germany hitting three-year lows. China also contributed to the day's distress after two reports on manufacturing showed growth continuing to slow.

Manufacturing in the United Kingdom also fell back.

European nations have been struggling with a tottering banking system. Spain's largest banks are largely wards of the state, and a big issue now appears to be finding a eurozone-wide mechanism to insure bank deposits as completely as the Federal Deposit Insurance Corp. does in the United States.

Crude oil drops, but gold rises
Crude oil (-CL) settled down $3.30 to $83.23 a barrel, potentially its lowest price since Oct. 7. It had traded as low as $82.70. Brent crude, the benchmark North Sea oil, fell to $98.43 a barrel, down $3.44. It was the first close below $100 for Brent since Oct. 4 and its lowest close since January 2011.

Crude in New York is off more than 15% this year and 26% since peaking at $109.77 a barrel on Feb. 24. Brent has fallen 22% since peaking on March 1.

Energy shares were lower as oil dropped. Exxon Mobil (XOM) was down 71 cents to $77.92. Chevron (CVX) dropped $1.90 to $96.41. Schlumberger (SLB) fell $1.18 to $62.07.

The national average retail price of gasoline fell to $3.611 a gallon today, according to AAA's Daily Fuel Gauge Report, from $3.626 on Thursday. Gasoline is still up 10% for the year but down 8.3% from a peak of $3.936 in early April.

Gold (-GC), however, jumped $57.90 to settle at $1,622.10 an ounce. Silver (-SI) closed up 75.5 cents to $28.51 an ounce, and copper (-HG) rose 5.2 cents to $3.3135 a pound.

The euro, however, moved higher against the dollar, trading at $1.24285, up from Thursday's $1.2364. It had traded as low as $1.23183.

Energy prices -- New York close
			Fri.			Thur.			Month chg.			YTD chg.
Crude oil (-CL)			$83.23			$86.53			-3.81%			-15.78%
(per barrel)
Heating oil (-HO)			$2.6279			$2.7032			-2.79%			-9.82%
(per gallon)
Natural gas (-NG)			$2.3260			$2.4220			-3.96%			-22.18%
(per mil. BTU)
Unleaded gasoline (-RB)			$2.6568			$2.7227			-2.42%			-0.02%
(per gallon)
Brent crude			$98.71			$101.87			-3.10%			-8.07%
(per barrel)
Retail gasoline			$3.6110			$3.6200			-0.25%			10.23%
(per gallon; AAA)

Auto stocks fall as strong sales actually disappoint
Auto sales were good. They were very good. But not good enough for Wall Street.

Shares of most automakers, including Ford Motor (F), Toyota (TM), Honda Motor (HMC) and Nissan (NSANY), were all lower this afternoon as automakers reported May sales.

GM deliveries last month rose 11% to 245,256. Toyota's sales surged 87% to 202,973, Chrysler's climbed 30% to 150,041 and Nissan's increased 21% to 91,794.

But the consensus estimates ahead of the reports were for gains of 15% by GM, 93% by Toyota, 40% by Chrysler and 29% by Nissan.

Volkswagen's (VLKAY) U.S. sales so far in 2012 are the company's best since 1973. But shares fell $1.12 to $29.01.

Overall, sales in May ran at a seasonally adjusted annual rate of 13.8 million units, according to market-research firm Autodata. This is the first month since December that the sales rate has been under 14 million units. But before you panic, deliveries for May were up 25% from a year ago and 12.7% from April.

GM shares moved up briefly but ended down 19 cents to $22.01. The company said today it plans to offer a lump-sum payment to about 42,000 current retirees to invest as they see fit. Those who don't accept will get their pensions via a group annuity purchased through Prudential Insurance. The move is expected to cut GM's pension obligations by some $26 billion.

Wal-Mart is the best Dow performer; gold stocks jump
None of the 30 Dow stocks finished in the black today. The best performer was Wal-Mart Stores (WMT), down 27 cents to $65.55.

The laggard was Hewlett-Packard (HPQ), down $1.43 to $21.25 after Jeffries analyst Peter Misek said the company's restructuring efforts weren't enough to offset weak sales in Europe and declining personal-computer and printer sales.

Only seventeen S&P 500 stocks were higher, along with just two Nasdaq-100 stocks.

Gold miners had a big day. Newmont Mining (NEM), the largest U.S. gold producer, was the S&P 500 leader, up $3.14 to $50.30. Randgold Resources (GOLD) was the Nasdaq-100 leader, up $7.91 to $87.26. Duke Energy (DUK) was second among S&P 500 stocks; Infosys (INFY) was the second Nasdaq-100 stock that finished with a gain.

Homebuilding stocks were among the day's biggest losers. PulteGroup (PHM) fell $1.10 to $8.26.

Short hits from the markets -- New York close
			Fri.			Thur.			Month chg.			YTD chg.
Treasury yields
13-week Treasury bill			0.0700%			0.070%			0.00%			600.00%
5-year Treasury note			0.620%			0.671%			-7.60%			-25.30%
10-year Treasury note			1.467%			1.581%			-7.21%			-21.59%
30-year Treasury bond			2.540%			2.672%			-4.94%			-12.08%
Currencies
U.S. Dollar Index			82.973			83.129			-0.19%			3.04%
British pound			1.5368			1.5411			-0.29%			-1.09%
(in U.S. $)
U.S. $ in pounds			£0.651			£0.649			0.29%			1.10%
Euro in dollars			$1.24			$1.24			0.46%			-4.16%
(in U.S. $)
U.S. $ in euros			€ 0.805			€ 0.809			-0.46%			4.34%
U.S. $ in yen			78.31			78.37			-0.31%			1.57%
U.S. $ in Chinese			6.39			6.36			0.16%			1.04%
yuan
Canada dollar			$0.962			$0.969			-0.68%			-1.96%
(in U.S. $)
U.S. dollar			$1.040			$1.032			0.69%			2.00%
(in Canadian $)
Commodities
Gold (-GC)			$1,622.10			$1,564.20			3.70%			3.53%
(per troy ounce)
Copper (-HG)			$3.314			$3.366			-1.55%			-3.57%
(per pound)
Silver (-SI)			$28.5120			$27.7570			2.72%			2.14%
(per troy ounce)
Wheat (-ZW)			$6.1225			$6.4375			-4.89%			-6.20%
(per bushel)
Corn (-ZC)			$5.5150			$5.553			-0.68%			-14.69%
(per bushel)
Cotton			$0.6885			0.7185			-4.18%			-24.90%
(per pound)
Coffee			$1.5985			1.6295			-1.90%			-30.39%
(per pound)
Crude oil (-CL)			$83.23			$86.53			-3.81%			-15.78%
(per barrel)