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Wall Street takes a hit amid spike in jobless rate


Latest update : 2009-07-03

Shares on Wall Street fell appreciably on Thursday following news that the US unemployment rate hit a 26-year high in June at 9.2%, dampening hopes of an early recovery from the economic crisis.

REUTERS - US stocks tumbled on Thursday, driving the S&P 500 down to its third-straight weekly loss, as a steeper-than-expected slide in June non-farm payrolls revived caution about economic recovery prospects.

News that U.S. employers shed nearly half a million jobs last month and the unemployment rate jumped to 9.5 percent, the highest in nearly 26 years, dampened recent hopes that the recession might be abating.

Investors pummeled stocks across the board, but energy, industrials, financials, technology and consumer-oriented shares were among the hardest-hit sectors.

These sectors were at the forefront of the broader market's recent recovery from the 12-year closing lows of early March as investors bet that the worst of the economic slump was over.

All told, the jobs data served as a reality check and signaled that any recovery will not be smooth sailing, analysts said.

"Quite frankly, rising unemployment is bad for the entire economy," said Sasha Kostadinov, portfolio manager at Shaker Investments in Cleveland, Ohio. "It's not positive for discretionary stocks. It's not positive for financials -- because there's a direct correlation between the high unemployment rate and charge-offs and delinquent payments."

The Dow Jones industrial average dropped 223.32 points, or 2.63 percent, to 8,280.74. The Standard & Poor's 500 Index slid 26.91 points, or 2.91 percent, to 896.42. The Nasdaq Composite Index sank 49.20 points, or 2.67 percent, to 1,796.52.

The S&P 500 fell for a third straight week. But it's still up 32.5 percent from the 12-year closing low of March 9.

For the week, the blue-chip Dow average slipped 1.9 percent, while the S&P 500 dropped 2.5 percent and the Nasdaq lost 2.3 percent.

Light volume due to Wall Street's thinly staffed trading desks accentuated Thursday's sell-off.

Additionally, the New York Stock Exchange was hit by connectivity glitches that affected orders originating from the trading floor. The NYSE extended its regular close from 2000 GMT to 2015 GMT to execute customer orders affected by system irregularities.

U.S. financial markets will be closed on Friday for the U.S. Independence Day holiday, with July 4th falling on Saturday this year.


IBM and Exxon slide

On the technology front, shares of International Business Machines Corp, a technology services giant, tumbled 3 percent to $101.73, making the stock the Dow's top decliner.

Apple Inc, another tech bellwether and the maker of the iPhone, slid 2 percent to $140.02. It was the Nasdaq's worst drag.

In the energy sector, Exxon Mobil Corp shed nearly 3 percent to $68.49, while the S&P energy index dropped 3.6 percent. U.S. front-month crude declined $2.58, or 3.7 percent, to settle at $66.73 a barrel.

NRG Energy Inc shares slumped 4.8 percent to $24.80 after Exelon Corp raised its hostile takeover bid for the independent power producer by more than 12 percent to $7.45 billion, ahead of NRG's annual meeting.

Among consumer-oriented stocks, department store operator Macy's Inc lost 6.3 percent to $11, while the S&P retail index fell 4 percent.

Housing stocks were not spared, with the Dow Jones U.S. home construction index down 3 percent. The S&P 500's consumer discretionary sector dropped 3.7 percent.

In deal news, healthcare giant Johnson & Johnson said it agreed to pay $1 billion for an 18.4 percent stake in Elan Corp plc and will buy most rights to the Irish company's portfolio of experimental drugs to treat Alzheimer's disease.

Elan's U.S.-traded shares jumped 8.6 percent to close at $7.60 on the New York Stock Exchange, while J&J's stock, a Dow component, fell 1.9 percent to $55.98.

Data showing U.S. factory orders were better-than-expected in May was overshadowed by the bleak news on the labor market.

On the New York Stock Exchange, only about 733.6 million shares changed hands, way below last year's estimated daily average of 1.49 billion, while on the Nasdaq, about 1.96 billion shares traded, also below last year's daily average of 2.28 billion.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of 4 to 1, while on the Nasdaq, about five stocks fell for every one that rose


Date created : 2009-07-03