Stocks moved sharply lower over the course of the trading day on Friday as traders reacted to a much weaker than expected jobs report. With the steep losses on the day, the markets extended the substantial downward move that was seen for much of May.
The major averages ended the session firmly in negative territory, just off their worst levels of the day. The Dow tumbled 274.88 points or 2.2 percent to 12,118.57, the Nasdaq plunged 79.86 points or 2.8 percent to 2,747.48 and the S&P 500 dove 32.29 points or 2.5 percent to 1,278.04.
With the steep losses on the day, the major averages all moved lower for the week. The Dow fell by 2.7 percent, while the Nasdaq and the S&P 500 dropped by 3.2 percent and 3 percent, respectively.
The sell-off on Wall Street came on the heels of the release of a report from the Labor Department showing much weaker than expected job growth in the month of May.
The report showed that the U.S. economy added just 69,000 jobs in May compared to economist estimates for an increase of about 150,000 jobs.
The weaker than expected job growth contributed to a modest increase in the unemployment rate, which edged up to 8.2 percent, marking the first increase since last June.
Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "May's employment report clearly suggests that U.S. labor market conditions are deteriorating again, which will undoubtedly prompt more speculation that QE3 is coming soon."
"We still don't think it is the near certainty some commentators seem to believe," he added. "Nevertheless, it does now appear that the global slowdown, and events in Europe particularly, are beginning to have a more marked impact on the U.S. economy."
Generating additional selling pressure, a report from the Institute for Supply Management showed that its index of activity in the manufacturing sector fell by more than expected.
The ISM said its purchasing managers index fell to 53.5 in May from 54.8 in April, although a reading above 50 indicates continued growth in the manufacturing sector. Economists had been expecting the index to edge down to a reading of 54.0.
Among individual stocks, shares of OmniVision Technologies (OVTI) tumbled by 17.2 percent after the digital imaging solutions company reported weaker than expected fourth quarter earnings and forecast first quarter earnings below analyst estimates.
While significant weakness was visible in a variety of sectors, housing stocks posted particularly steep losses on the day. The Philadelphia Housing Sector Index fell by 6.3 percent to its lowest closing level in almost three months.
PulteGroup (PHM) and M/I Homes (MHO) turned in two of the housing sector's worst performances, tumbling by 11.8 percent and 10.1 percent, respectively.
Banking stocks also moved sharply lower over the course of the session, dragging the KBW Bank Index down by 4.9 percent. With the loss, the index ended the session at a nearly five-month closing low.
Considerable weakness was also visible among semiconductor stocks, as reflected by the 4.1 percent loss posted by the Philadelphia Semiconductor Index. Computer hardware, natural gas, and trucking stocks also saw notable weakness, reflecting the broad based selling pressure.
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index tumbled by 1.2 percent, while Hong Kong's Hang Seng Index ended the day down by 0.4 percent.
The major European markets also showed notable moves to the downside on the day. While the U.K.'s FTSE 100 Index fell 1.1 percent, the French CAC 40 Index slumped 2.2 percent, and the German DAX Index plummeted 3.4 percent.
In the bond market, treasuries moved sharply higher on the heels of the disappointing jobs data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 11.4 basis points to a new record closing low of 1.467 percent.
Following the slew of key U.S. economic data released over the past two days, the economic calendar for next week is relatively light.
Subsequently, traders are likely to keep a close eye on developments in Europe as well as Congressional testimony from Federal Reserve Chairman Ben Bernanke
Reports on U.S. trade, factory orders, service sector activity, and labor productivity are still likely to attract some attention, however.
by RTT Staff Writer
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