Stocks Slump After Jump in Unemployment Rate

By: AP
By: AP

NEW YORK – Investors sent stocks sharply lower Friday after the U.S. unemployment rate shot above 7 percent, signaling that Americans will be sticking to their tightened budgets for a while. The Dow Jones industrials were down more than 100 points.

The Labor Department said employers cut 524,000 jobs in December, a smaller decline than economists' forecast for a loss of 550,000 jobs. But the unemployment rate jumped to a 16-year high of 7.2 percent — more than the 7 percent economists predicted — from 6.8 percent in November.

The bad news was not a huge shock to Wall Street, but it still stung.

"People say that they know how bad the economy is. But they don't know how it feels to have the reality hit home," said Stu Schweitzer, global markets strategist at J.P. Morgan's Private Bank. "It's not the facts — it's how the facts feel. And it feels terrible to have so many Americans losing jobs, and so many more likely to follow in the coming months."

Rising unemployment tends to erode consumer spending, which accounts for more than two-thirds of U.S. economic activity. For all of 2008, the economy lost 2.6 million jobs — the most since 1945. Retailers have been reporting dismal holiday sales figures, and Wall Street is concerned about how long the economy will be suffering a pullback in consumer spending.

President-elect Barack Obama on Friday called December's jobs loss "a stark reminder of how urgently action is needed" to revive the nation's staggering economy. Obama is planning on a stimulus package costing about $800 billion, consisting of tax cuts and other ways to try to help individuals and businesses.

Nick Kalivas, vice president of financial research at the brokerage MF Global, said he believes investors will start buying back into the market again, but slowly and cautiously. "There's nothing in the short-term that's going to give people real satisfaction," he said.

In early afternoon trading, the Dow Jones industrial average fell 102.98, or 1.18 percent, to 8,639.48.

Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 13.41, or 1.47 percent, to 896.34, and the Nasdaq composite index fell 31.56, or 1.95 percent, to 1,585.45.

The Russell 2000 index of smaller companies dropped 14.38, or 2.9 percent, to 487.63.

In other economic data, the Commerce Department reported that businesses cut wholesale inventories for a third straight month in November, while sales continued to plunge. Wholesale inventories dropped 0.6 percent, and sales were down a record 7.1 percent.

Bond prices rose after Friday's grim economic data. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.37 percent from 2.44 percent late Thursday. The yield on the three-month T-bill, considered one of the safest short-term investments, slipped to 0.07 percent from 0.08 percent compared with late Thursday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude fell $1.44 to $40.26 a barrel on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average fell 0.45 percent. Britain's FTSE 100 fell 1.26 percent, Germany's DAX index fell 1.97 percent, and France's CAC-40 fell 0.75 percent.


Comments are posted from viewers like you and do not always reflect the views of this station.
powered by Disqus
631 SW Commerce Pl. Topeka, Kansas 66615 phone: 785-272-6397 fax: 785-272-1363 email: feedback@wibw.com
Copyright © 2002-2014 - Designed by Gray Digital Media - Powered by Clickability 37348154 - wibw.com/a?a=37348154
Gray Television, Inc.