Wall St Tumbles After Jobs Data

Source : The Straits Times, Sep 8, 2007

NEW YORK - US stocks tumbled on Friday, driving major indexes down nearly 2 per cent, as data showing the first monthly drop in payrolls in four years stoked fears on Wall Street that the economy was headed into recession.

Stocks across the board dropped sharply after the government said employers cut a net 4,000 jobs in Aug, when turmoil in the subprime mortgage market led to a tightening of corporate credit and heightened concerns about the wider economic impact.

The report cemented expectations the Federal Reserve would cut interest rates when policymakers meet on Sept 18.

Anxiety about next week's anniversary of the Sept 11 attacks further soured the mood on Wall Street.

'Going into the weekend and the Sept 11 anniversary looming, I think buyers are a little bit reluctant,' said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

But the main focus was on the economy as shares of industrial companies, which often react to economic cycles, fell sharply. Caterpillar Inc, was down 3.1 per cent at US$73.44 (S$111.9), while Honeywell International, was down 3.4 per cent at US$54.71.

Computer-related companies, which had been outperforming the broader market, also were among the top drags. Chip maker Intel fell 2.6 per cent to US$25.47.

The jobs data 'was so negative and bad, now the recession fear is jumping back into the market', said Scott Wren, senior equity strategist at A.G. Edwards & Sons Inc., in St. Louis.

The Dow Jones industrial average ended down 249.97 points, or 1.87 per cent, at 13,113.38. The Standard & Poor's (S&P) 500 Index was down 25 points, or 1.69 per cent, at 1,453.55. The Nasdaq Composite Index closed 48.62 points lower, or 1.86 per cent, at 2,565.70.

The Dow was down 1.8 per cent for the week, while the S&P 500 shed 1.4 per cent and the Nasdaq fell 1.2 per cent. For the S&P, it was the worst week since the beginning of Aug, while the Dow had its worst week since the week ended July 29.

Drop in payrolls
The drop in payrolls came as a surprise since economists' consensus forecast was for creation of 110,000 jobs. Payroll growth in July and June was also revised sharply lower.

Interest-rate futures reflecting expectations for a half-percentage-point cut in US benchmark rates, followed by further cuts, jumped aggressively following the data.

US staffing companies' shares dropped, with a gauge of staffing and human resources stocks, the Standard & Poor's HR Employment Services index down 2.7 per cent.

Shares dependent on discretionary spending also fell as speculation mounted that consumers will tighten their grip on their wallets in the face of a weakening housing and employment climate.

Trading volume was below average on the New York Stock Exchange (NYSE), as it has been all week. About 1.46 billion shares changed hands compared with last year's estimated daily average of 1.84 billion. On Nasdaq, about 1.9 billion shares traded, below last year's daily average of 2.02 billion.

Declining stocks were outnumbering rising ones by a ratio of about 13 to 4 on the NYSE and by 4 to 1 on Nasdaq. -- REUTERS