Many investors had sold stocks ahead of the Labor Department’s jobs report, which analysts in a Bloomberg News survey had forecast would show a gain of 68,000 nonfarm payrolls.
The monthly report showed there was no job growth in the United States in August, and the flat performance had a direct impact on stocks in market-sensitive sectors.
The August jobs figure was down from a revised 85,000 new jobs added in July. The unemployment rate stayed at 9.1 percent in August, the department said.
Philip J. Orlando, chief equity market strategist at Federated Investors, said the jobs report was “very disappointing. It was much weaker than expected. We were thinking that if today’s jobs number was poor, we would start to see a pullback.”
In addition, analysts said financial stocks were hurt during the day by the prospect that a federal agency was set to file lawsuits against more than a dozen big banks over their handling of mortgage securities. Regulators filed the suits on Friday.
The suits by the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs, Citigroup and Deutsche Bank, among others.
“This is not good news from the perspective of the banking sector,” Mr. Orlando said.
When the stock market opened, all three major Wall Street indexes slid lower and stayed there. The Dow Jones industrial average closed down 253.31 points, or 2.20 percent, at 11,240.26. The Standard Poor’s 500-stock index was down 30.45 points, or 2.53 percent, at 1,173.97. Both indexes ended the week lower, the Dow by 0.3 percent and the S. P. 500 by 0.2 percent.
The Nasdaq composite index ended the day down by 65.71 points, or 2.58 percent, at 2,480.33. But it managed to squeeze out a 0.2 percent gain for the week.
The Treasury’s benchmark 10-year note rose 1 8/32, to 101 6/32, and the yield fell to 1.99 percent from 2.13 percent late Thursday.
Kate Warne, investment strategist at Edward Jones, said the jobs report raised fresh concerns about whether the economy might be headed for a new recession.
“Clearly, stocks are responding to the very disappointing jobs report,” Ms. Warne said. “It is one more piece of bad news that is really leading to a reassessment of the possibility of even slower economic growth.”
Though she said she did not believe there would ultimately be a double-dip recession, “the risks probably have risen.”
Financial stocks were affected by the jobs report because of its implications for the real estate market, retailing and consumer lending. The financial sector slid by 4 percent, dragging down the broader market, with the five most actively traded banks in the sector each down by 4 percent or more. Bank of America was more than 8 percent lower at $7.25. Wells Fargo was down 4 percent at $24.20 and JPMorgan was down more than 4 percent at $34.63.
Ms. Warne said that the impending lawsuits meant the banks would face additional legal troubles from lending that took place before the last recession. “There are not just concerns about weak growth, but increased worries that those problems are not behind them,” she said.
Industrial shares fell more than 3 percent. General Electric was down by 2.7 percent at $15.76. CSX was down 4.5 percent at $20.56.
Lower market results in the United States came after declines in Asia and Europe. The Euro Stoxx 50 index closed down by 3.69 percent. The DAX in Germany lost 3.36 percent and the CAC 40 in France fell 3.59 percent, while the F.T.S.E. in Britain was down by 2.34 percent. In Asia, the Shanghai, the Nikkei and the Hang Seng indexes each closed down by more than 1 percent.
“The latest fall follows a highly volatile August period which saw global markets take substantial hits over political uncertainty over the U.S. debt ceiling and subsequent credit downgrade,” John Douthwaite, chief executive of SimplyStockbroking, said in a research note.
In August, all three indexes in the United States turned in their worst monthly performance since 2001. Shares took a beating for reasons that included fears of an economic slowdown and fiscal problems in the United States as well as continuing concerns over debt issues in Europe.
Mr. Douthwaite said market turbulence would probably continue in September because of weak economic data from the United States and Europe.
The worse-than-expected jobs report led some economists to predict new action by the Federal Reserve at its meeting on Sept. 20-21.
Economists from Goldman Sachs said that the Fed was more likely to lengthen the average maturity of its balance sheet, with sales of relatively short-dated Treasuries and purchases of relatively long-dated Treasuries. Mr. Orlando said the central bank could also cut the premium on banking reserves to encourage banks to lend more.
Oil futures in New York for October delivery fell 2.8 percent to about $86.45. Energy related stocks declined by more than 2.5 percent.
Gold rose 2.6 percent to $1,873.70.
Shaila Dewan and Nelson D. Schwartz contributed reporting.
Article source: http://www.nytimes.com/2011/09/03/business/daily-stock-market-activity.html?partner=rss&emc=rss
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