Posted by: Schuyler R. Thorpe | October 16, 2011

US Hiring Dries Up In August, Markets Lower

Stocks plunge after US hiring dries up in August

Stocks tumbled Thursday after an awful report on the job market renewed fears of another recession.

No new jobs were created last month, the government said early Friday. It was the worst report in 11 months. The unemployment rate held steady at 9.1 percent. It has been above 9 percent in all but two months since May 2009.

Treasury yields fell and gold rose as cash flowed into investments seen as less risky than stocks. Overseas markets followed U.S. stocks lower. They already had fallen on reports that talks about Greece’s shaky finances were breaking down.

Just after noon, the Dow Jones industrial average was down 180 points, or 1.6 percent, at 11,313. The Standard & Poor’s 500 index fell 21, or 1.8 percent, to 1,183. The Nasdaq composite index fell 42, or 1.7 percent, to 2,504

All 30 stocks in the Dow fell. Only one, Verizon Communications Inc., briefly turned positive.

The losses wiped out most of this week’s gains, leaving the Dow up just 0.3 percent. Stock indexes rose last week for the first time in five weeks.

Volume was thin ahead of the holiday weekend. Shares dropped Thursday, breaking a four-day rally. Analysts said many traders had sold shares before taking off a day early.

The weakness of the Labor Department’s closely watched jobs report surprised investors. Previously reported job addition figures for June and July were also revised lower. The average work week declined and hourly earnings fell.

The report further dampened hopes that the economy will improve in the second half of the year. Stagnant hiring and declining wages leave consumers with little money to spend. Consumer spending accounts for 70 percent the U.S. economy.

Cash poured into investments seen as lower-risk after the dismal jobs news. The yield on the 10-year Treasury note fell to 2.04 percent, from 2.14 percent shortly before the report came out. Bond yields rise as their prices fall.

The price of gold rose 2.8 percent to $1,880. Fears that a stalling economy could reduce demand for oil and gasoline pushed benchmark crude oil down $1.90, or 2.1 percent, to $87.03 in early-afternoon trading.

The VIX, a measure of market volatility, rose 3 percent to 33. The index has fallen from a recent high of 48 on Aug. 8, when the Dow lost 634 points following a downgrade of the U.S. government’s credit rating. It traded below 20 for most of the year.

Fears of another recession grew last month after markets swung wildly and global growth slowed. Consumer confidence plunged in August to a two-year low. A key category that tracks business investment fell sharply in July. Recent data were more encouraging, suggesting weak but steady economic expansion.

European stocks fell as negotiations about Greece’s shaky finances appeared to break down. The fell even more after the U.S. jobs report. Germany’s DAX closed down 3.4 percent and France’s CAC-40 fell 3.6 percent.

Bank of America Corp., the nations’ largest bank, sank 7 percent after The Wall Street Journal reported that regulators asked it to develop emergency plans because of its sagging share price and the weakening economy. Bank of America is down 44 percent this year, largely on concerns about legal costs related to shoddy mortgage investments that it sold.

Other big banks dropped on separate reports that the government is preparing to sue some of them, also over mortgage investments they sold that lost value when the housing market collapsed. The regulator of Fannie Mae and Freddie Mac says banks lied about the quality loans that they pooled. Goldman Sachs Group Inc. fell and Morgan Stanley fell about 4.5 percent. Citigroup Inc., Wells Fargo & Co. and JPMorgan Chase & Co. lost about 3.5 percent

Netflix Inc. plunged more than 9 percent after talks collapsed with a key provider of movies and shows. Starz Entertainment said late Thursday that it won’t renew a contract that allows Netflix to stream recently released movies and TV shows online.

The Dow, S&P and Nasdaq all had their worst August since 2001 as economic fears and instability in financial markets and European banks added to investors’ worries.


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