Dow sinks more than 200 points on dismal jobs data

By Shanthi Bharatwaj

U.S. stocks plunged in early trading Friday after the government said the economy added far fewer jobs than expected, adding to concerns about a global slowdown.

The Dow Jones Industrial Average ($INDU) was down by more than 200 points at 12,191. The S&P 500 ($INX) was losing 24 points at 1286. The Nasdaq ($COMPX) was shedding 55 points to 2,771.

All 30 Dow components were trading in the red Friday. Hewlett Packard (HPQ), Bank of America (BAC) and American Express (AXP) were among the biggest percentage decliners.

In the broader markets, losers were outpacing winners by 8-to-1 on the New York Stock Exchange and by about 7-to-1 on the Nasdaq.

The Labor Department said early Friday the economy added 69,000 jobs in May, well below the 150,000-plus jobs economists were expecting. 

The private sector added 82,000 jobs, compared to market's expectation of 164,000.

Unemployment rate ticked up to 8.2%. Economists were expecting the rate to remain steady at 8.1%.

The report also included downward revisions to March and April numbers. The economy created only 143,000 jobs in March, compared to 154,000 estimated earlier.

In April, nonfarm payrolls rose by only 77,000, a significant reduction from the 115,000 originally estimated.

The pace of job creation has decelerated sharply since the first quarter, when the average monthly gain was 226,000.

Demand for haven assets rose amid heightened risk aversion, pushing the  yield on  the 10-year Treasury note below 1.5% for the first time ever. Gold was rising sharply amid renewed expectations for additional quantitative easing in the wake of the disappointing data.

Global markets had already been trading weaker amid fresh signs of a slowdown in China and further weakness in Europe.

China posted its slowest manufacturing growth in more than a year, with the purchasing managers index falling to 50.4 in May from 53.3 in April.

Japan's Nikkei shed 1.2%, while Hong Kong's Hang Seng Index declined 0.4%.

European shares dropped amid reports of a further slowdown in manufacturing and rising unemployment in the 17-nation eurozone.

The eurozone PMI declined to 45.1 in May from 45.9 in April, marking a three-year low. Unemployment in the region hovered at 11%, with 17.1 million people now without jobs.

The FTSE in U.K. deepened losses, losing 1.1%, while Germany's DAX was plunging more than 3%.

In Germany, the yield on two-year bonds turned negative for the first time, indicating that investors were essentially paying for capital protection.

Meanwhile, the  U.S. Bureau of Economic Analysis also released numbers on personal income and spending.

Personal income increased $31.7 billion, or 0.2 percent in April, down from 0.4% in March.

Personal consumption expenditure rose 0.3%, up from 0.2% in March. 

The Institute for Supply Management's index of manufacturing activity dipped to 53.5 in May from 54.8 in April, below expectations for a reading of 54.

 

The Commerce Department said construction spending data rose 0.3% in April, compared toa  forecast for a 0.4% rise.

The afternoon will feature reports on auto and truck sales.

 

“It’s hard to look around and see a lot of rays of sunshine. I think it’s important to recognize, though, that every time in this recovery when things have looked gloomy, the economy has turned out to be resilient – not strong, but it keeps going,” said Josh Feinman, global chief economist at Deutsche Bank Advisors.

“I think it would take something of [drastic] nature to undermine the recovery, but at the same time that recovery – I would characterize the recovery as fluctuations around a mediocre trend. That’s kind of what it is; we’re bouncing around a growth trend that is, for a lack of a better word, just pretty darn mediocre,” said Feinman.

Commodities markets were lower Friday. July oil futures were down by $3.01 at $83.52 a barrel. 

August gold futures were rising $48.3 to $1,612 an ounce, reversing earlier declines.

Meanwhile, the benchmark 10-year Treasury was higher by 28/32, lowering the yield to 1.47%. The greenback was last trading flat against a basket of currencies, according to the dollar index.

In corporate news, BP (BP) said Friday it has received "unsolicited indications of interest" for its 50% stake in TNK-BP, Russia's third-largest oil producer.

BP's stake in TNK-BP could be worth more than $30 billion, according to The Wall Street Journal.

Shares were up 1.3%.

General Motors (GM) said vehicle sales rose 11% in May to 245,256 vehicles over the same month a year ago, its highest monthly total since August 2009. Shares were still falling nearly 3%.

Ford (F) said sales of vehicles rose 13% in May, led by rapid growth in pick-up truck sales.The stock was down 3.4%.

Shares of Groupon (GRPN) were down more than 9%. The company's post-IPO lock-up has expired, freeing up more shares for trading.

Wal-Mart (WMT) holds its annual shareholder meeting Friday amid calls for Wal-Mart's CEO and chairman to be removed from the board after a bribery investigation in Mexico. Shares were lower by 0.2%.

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