Dow plunges 275 on disappointing jobs report

The blue chips go negative for 2012 as stocks suffer their worst day in at least 7 months, as payrolls grow less than half of estimates. The unemployment rate rises to 8.2%. Crude oil drops below $84. Gold moves higher. May auto sales disappoint.

By Charley Blaine Jun 1, 2012 10:48AM
Charley BlaineUpdated: 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.

Article continues below.
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)










 

762Comments
Jun 1, 2012 12:03PM
avatar
This is what happens when an ne'er do well occupies the Executive Mansion ...
Jun 1, 2012 12:02PM
avatar
hmmm, wouldn't put it pass the goverement to rethink there stance on unemployment for the rest of us now-this close to the election
Jun 1, 2012 12:02PM
avatar
OBAMA BLAMES Bush ... BAIN CAPITAL ... and the Evil Empire as described in STAR WARs
avatar
I don't want America to fail...................the NYSE  in a complete meltdown would be "my precious"!
Jun 1, 2012 12:00PM
avatar
Like everyday for 3+ weeks some folks will buy on the bounce and get out before the drop.
Since I have no inside information as to what the big guys are going to buy-then-sell, I will continue not to play this game.
Jun 1, 2012 11:50AM
avatar

"The Dow goes negative for 2012 as payrolls grow less than half than expected. The unemployment rate rises to 8.2%. Crude oil drops below $84. Gold moves higher. GM's May sales were the best since 2009."

 

Leave it to Charley to make sure he puts in a positive comment despite a mountain of negative economic news.  So he thinks by saying "GM's May sales were the best since 2009" will make everyone feel better?  Give me a break!!!!

Jun 1, 2012 11:49AM
avatar

Alright Charley definitely not your biggest fan, but thanks for reporting the news as is today.

 

Glad I shorted this market a month ago.  Going to get out on the short side now before QE3 inflates everything for a month or two.  Getting in on Gold at the first drop and sit back for the skyrocket.  Get out completely then and put all of the funds in the Guns and Ammo Index.

Jun 1, 2012 11:44AM
avatar
I have a question for all you brokers out there.  Do you know ahead of a days trading  about what the employment data numbers are going to be?
Jun 1, 2012 11:41AM
avatar
..butler or maid....

Yes! Especially an Illegal, since they are guaranteed to come with no papers, demand less wages, provide their own upkeep, send your money to Mexico's economy,  and never complain.
Isnt that what Republicans like? 

Jun 1, 2012 11:40AM
avatar
The Dow has now fallen 8.4% since peaking on May 1. The S&P 500 is off 9.5% since its peak of 1,419 on April 2, though it remains up 2.1% for the year. The Nasdaq has dropped 11.4% since peak peak on March 26. Its gain has been cut from 20% to 6.3%.

Investors are down 6% for 2012 alone. The markets are taking away from any gain we had in 2010. The chances of any gain in 2012 would be unheard of now because the Dow would have to go over 14000 just to be even for the year. Investors have by far more losses in the last month than anytime in 2008.
Jun 1, 2012 11:31AM
avatar
I can't understand why you all haven't hired another butler or maid........
Jun 1, 2012 11:31AM
avatar

The middle and working class people
are getting screwed at the same time
that mega CEO compensation is happening.
Jun 1, 2012 11:27AM
avatar
If you fire everybody to pay the CEO........nobody is left to buy your products.........
Jun 1, 2012 11:27AM
avatar
Brutus and 2sick, and all your 'rabid Righty' friends:

BUNKERS FOR SALE.   These come fully stocked
with guns, Lots and Lots of fully automatic, such as
AK 47s and M4s, etc.  Also, many styles of canned
porcupine and anteater for your gourmand's pleasure.
This offer includes several survival guides, detailing
how to Eat your own Young in the event of starvation ,
and the just released novel "Republicans deserve
to be in Charge again, because they did so well
the last three times" - by the way, this is Fiction.

Hurry before they are all gone. Offer expires July 4th.

Jun 1, 2012 11:25AM
avatar
There is nothing left for the 1% to steal....
Jun 1, 2012 11:22AM
avatar
For the Record:

A BS is not paid enough for his hard work.  Another bowl of Cheerios for him and add some lavender honey for sweetening...Heaven knows he could use something.



Jun 1, 2012 11:20AM
avatar
WHOO-HOO! What a great buying opportunity! N-O-T!!!!
Jun 1, 2012 11:05AM
avatar
all we need is Greece to exit the Euro now in the next couple weeks to get this global collapse snowball rolling
Jun 1, 2012 11:00AM
avatar
Darn you, Blaine!

This is all your fault....Oh,  and Obama's too.

{There, lets get that out of the road right away}
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