Stocks plunge, gold rallies as job market weakens

US employers added no jobs in August, and the unemployment rate remained at 9.1%. Gold prices rally as economic fears mount. Bank of America and JPMorgan drop after they're named in a subprime mortgage lawsuit.

By TheStreet Staff Sep 2, 2011 7:24AM

TheStreetBy Chao Deng, TheStreet

 

Updated at 12:04 p.m. ET

 

Stocks were plunging after the government reported that American employers added no jobs in August, stoking fears that the economy is headed for another downturn.

 

The Dow Jones Industrial Average ($INDU) was down by 175 points, or 1.5%, at 11,319. The S&P 500 ($INX) was down by 20 points, or 1.7%, at 1,184. The Nasdaq ($COMPX) was falling by 41 points, or 1.6%, to 2,505.

 

The job market showed no growth for August, falling short of the 70,000-job increase economists had expected. Employers also added fewer positions in June and July than previously thought, the Labor Department said. About 85,000 workers were added in July, instead of the expected 117,000. The unemployment rate was unchanged at 9.1% in August, as expected by economists surveyed by Thomson Reuters. 

 

Risk appetite dwindled ahead of the long weekend, as the weak jobs report increased recessionary fears and bearishness in the market. Safe havens like gold looked increasingly attractive. Gold for December delivery was soaring $50.70 to trade at $1879.80 an ounce.

 

Fears about the government's jobs report were building earlier this week. On Wednesday, Automatic Data Processing (ADP) said companies added 91,000 workers, fewer than forecast. 

 

The Office of Management and Budget said Thursday that the unemployment rate will probably remain at 9% next year, when President Barack Obama will seek re-election. The office also forecast the U.S. economy to grow 1.7% this year and 2.6% next year. Obama will discuss ways to create jobs in a speech before Congress on Sept. 8.

 

Post continues below.

Thomas Berner, economist with UBS Wealth Management, said he doesn't expect to see stocks rebound today. The jobs data have highlighted the risk that the economy is on the brink of another contraction, he said.

 

All 30 components of the Dow were falling, with Bank of America (BAC), JPMorgan (JPM) and Hewlett-Packard (HPQ) posting the biggest losses. Verizon Communications (VZ) was leading the benchmark.

 

Among S&P 500 stocks, 97% were losing value. H&R Block (HRB) and Netflix (NFLX) were the index’s top laggards.

 

Today's losses deepen yesterday's market slump. The major averages closed about 1% lower on Thursday, ending a four day winning streak.

 

Global markets sold off on news of the U.S. jobs report as well. The FTSE in London was losing 2.6% and the DAX in Frankfurt plunging 3.4%. In Asia, Hong Kong's Hang Seng lost 1.8% while Japan's Nikkei lost 1.2%.

 

The October crude oil contract was slipping by $2.57 to trade at $86.36 a barrel.

 

The benchmark 10-year Treasury was surging 23/32, diluting the yield to 2.055%. The dollar index, which compares the dollar with a basket of six currencies, was gaining 0.223%.

 

Related Articles

 

In corporate news, the Federal Housing Finance Agency is filing a lawsuit against more than a dozen banks, including Bank of America (BAC), JPMorgan Chase (JPM) and Goldman Sachs (GS), alleging that they misrepresented mortgages they sold before the subprime loan crisis erupted. Shares of Bank of America were falling 6.5% to $7.40, while JPMorgan was down 3.9% to $34.90. Goldman Sachs was losing 4.7% at $106.91.

 

Netflix (NFLX) shares were tumbling 9.4% to $211.33 Friday after Starz announced it ended contract renewal discussions with the high-flying DVD rental and content streaming company.

Finisar (FNSR) shares were surging 12.9% to $21 after the optical communications equipment maker topped earnings forecasts for its latest quarter by keeping a lid on operating expenses.

296Comments
Sep 2, 2011 11:07AM
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Interesting,

if you cross the North Korean border illegally, you get 12 years hard labor.

If you cross the Afghanistan border illegally, you get shot.

Two Americans just got eight years for crossing the Iranian border on accident.

 

If you cross the U.S. border illegally you get a job, a driver's license, food stamps, a place to live, health care, housing & child benefits, education, & a tax free business for 7 yrs.

 

No wonder we are a country in debt.

Sep 2, 2011 10:28AM
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Can't wait for the Obama jobs work program next week.  It will call for investment (tax increase) for the uninformed..  The man and his economic team are clueless as to the fact until we bulid plants and actually make things again and send the illegals home (they are violating the rules of our land) we will continue on this path.

 

Jobless claims were over 400K again for last week and as usual the last week numbers were revised upward.

 

As far as the Verizon striking workers-I read they actually can not draw unemployment as they are were refusing to work, so they do not qualify for unemployment benefits.  I read however, that they can still apply for benefits even if they do not qualify so they they are included. 

 

The whole system is flawed.  If I run out of benefits I am no longer counted as unemployed, but if I go on strike I and can not legally obtain benefits but I am counted in the numbers.

 

No net jobs for August and June and July bloated #'s reduced.

 

I remember people saying anything is better than BUSH, and I never saw a $ BUSH did not want to spend; but I will tell you now- ANYTHING IS BETTER THAN 4 MORE YEARS OF A CLUELESS OBAMA!

 

 

Sep 2, 2011 9:37AM
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Hard to understand unemployment rate ,,,, i do a lot of traveling though mainly Texas OK,ARK, LA and see help wanted signs every where . I was laid off spring of 2008 in Florida found a job within 2 weeks although I had to move to Texas to accept it. I look for Drivers everyday that are willing to work ,,,,,,, that is most peoples issue i believe not willing to sacrifice or get out from the norm looking for the golden egg.   I would go flip hamburgers if it meant i could feed my family while i was looking for the career job ,,,, just a thought ,,,,,,,BTW in my opinion next time congress decides to hold the American People Hostage over the budget maybe the American People should let them know their job and paycheck is in jeopardy ,,,Republican, Democrats, Independents and all.
Sep 2, 2011 8:46AM
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We're going to have to rename labor day since no one is working
Sep 2, 2011 10:33AM
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Raven273...   Yes, lets look at the Oil rig that exploded...  Did any of the 18,000 regulations governing oil rigs do a damn thing to prevent the explosion?   Will any of the new 4,200 new ones prevent it in the future?

 

Did a single SEC regualtion form the 80+ volumes prevent Enron?   Bernie Madoff?

 

Did any of the Banking regulations prevent a single failure?

 

Regualtions are useless to prevent anything.  Enforcement of LAW is what is needed!  Letting companies go bankrupt is needed. 

 

But regulations are useless...  Many laws are the same way...  Do the laws against crime prevent crime?  LOL...  Jail sentences and after the fact enforcement prevent crime.  Sometimes the penalties will deter crime...

 

But you canadd all the regualtions you want, they just drive up costs and PREVENT NOTHING...

Sep 2, 2011 10:25AM
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JEYPSNB...

 

Japan is what happens when you follow 10 years of Obama policies...   Massive Spending, Massive Debt, Zero job growth, Zero growth, and economic decline. 

 

The real question is why we are following Mr. Obama?

Sep 2, 2011 8:46AM
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Zero net jobs created in August.  Our 3rd attempt at a  "summer of recovery" ends with a 3rd consecutive  thud.


Sep 2, 2011 10:17AM
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I am willing to bet next week Obama's speech preaches more of the say crap that made things worse...   A massive new 'infrastructure bank' or something along those lines, but he will not mention 'shovel ready in the speech....  More spending galore....

 

Targeted 'tax credits' favoring one business over another...  Like GE...  They lay off thousands and Mr. Obama will give them Tax Breaks (so they can skate again) by rehiring the workers they fired....

 

This president is absolutely clueless about business...

 

He will also ask for more TAXES to help create jobs....

 

The market will tank 1,000 point the day after this speech, or maybe it will cause the Green Bay Packers will have lost their first game to the Saints....

Sep 2, 2011 10:03AM
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More than eight in 10 Americans think the economy is in another recession
The other Two think we are in the same recession
Sep 2, 2011 9:22AM
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Until the inventory of foreclosures drops a lot, the housing market is dead, and the housing market has traditionally been responsible for hundreds of thousands of jobs.  Companies moving their manufacturing off shore is another big factor in the jobs picture.  The few jobs being created are primarily in the service and retail sectors, which pay less than construction or manufacturing.  This is a systemic problem that cannot easily be fixed by politicians. 

I dislike and distrust political parties because they always over promise and under deliver. Their reason for existing is to win elections, which brings in more money, which gives them more power, which brings in more money . . . . .   

The best thing we can do is clean house every few years.  


Sep 2, 2011 10:19AM
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So they probably spent millions analyzing this  jobs report. Heck just look around at all the empty shops and restaurants. It doesnt take a rocket scientist to see we are headed for a worse recession than the last. Another 20% loss in housing prices and $5.00 a gallon gas. Thanks Obama.
Sep 2, 2011 10:07AM
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CNN Poll: 8 in 10 think we're in a recession

The remaining 2 in 10 actually know that we are in a depression.

Sep 2, 2011 8:47AM
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it was bush admin and congress  inheriting a good economy and blowing it by throwing a tax free party for all while spending and spending and warring and warring while corporations were shorting us all but people didnt know it at the time and everyone thought they could afford everything

 

I already had this ready for you delk....

 

"Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits."

Sep 2, 2011 10:25AM
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You want jobs? Can you handle the truth? If so, it is very, very simple. 1) Repeal O' Care; 2) Get the EPA off of the neck of business; 3) Dissolve all Labor Unions; 4) Exploit our own oil resources to drive down the cost of energy. The last one is my favorite because it has a plethora of benefits. It can be done safely by us (compared to other parts of the globe that don't care how they extract it). It de-funds our Arab enemies and Russia too. It will put more money in the hands of consumers/businesses and create jobs all at the same time! Can you handle the truth?
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The CEO's of US companies by firing American workers and hiring Chinese workers have broken the US economy and we are in a death spiral of lost jobs and an ever weaker and weaker economy. Bernanke printing money and handing it to the super rich Wall Street bankers has just made matters worse not better. 

We have reached an inflection point and things are going to get much worse much faster now.
Sep 2, 2011 8:19AM
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Was the historic rise in home prices (real estate) due to loosened lending restrictions / requirements, or was it consumer demand that drove the pricing up, independent of the softened lending attitude?
Hmmm, chicken or egg...I'm going with chicken on this one - IMO it was the loose lending that started it, along with artificially suppressed interest rates. 

Lenders wouldn't make risky loans unless they knew they could sell them.  And when the federal gov guaranteed Fannie and Freddie with no limits and no restrictions, these two behemoths were free to buy up as many mortgages as they wanted to, regardless of how risky.  Add in a newly created market for CDS and MBS and as a lender, you would be foolish NOT to make a loan, no matter how risky, because.....get ready for it......there were NO CONSEQUENCES!
Sep 2, 2011 11:29AM
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How much longer is Obama going to blame the previous administrations, when the real problem, right now, is his total lack of leadership and his utter failure to get the economy going?
Sep 2, 2011 10:18AM
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grab what you can on the way down.  'cause that's where it's going!

 

This headline is a joke. First, none of the economic data pointed to huge gains for employment, this was not a shock to anyone. I would suggest this is a lot of proffit taking today.
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It's official we are in a deeper recession than we use to be in.

CNN Poll: 8 in 10 think we're in a recession
By: CNN's Adam Levy

Washington (CNN) – Economic fears are not diminishing. More than eight in 10 Americans think the economy is in another recession, according to a new CNN/ORC poll. One-third of those surveyed think it’s serious.




Sep 2, 2011 11:04AM
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here we go again...lol ..political b.s. stopping the economy in it tracks once again.....you can thank your wonderfull leaders for this market !   we need leaders not these fools who are trying to run each other  out of washington! both parties leaders are terrible..we need a real leader ..doesn`t matter which party to me! i hope someone emerges bacause there is not much hope in what choices we have right now.
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