Unemployment report sparks sell-off

A worse-than-expected unemployment report ignited another dizzying sell-off Friday, sending the Dow Jones industrials tumbling more than 230 points and the Standard & Poor's 500 index to its lowest level in nearly three years.

Analysts blamed the losses on Wall Street's growing fears that the economy is worsening and more bad news, rather than a turnaround, is ahead.

"The unemployment rate was higher than we anticipated and people are concerned that the economic slowdown isn't showing signs of recovery," said Robert Harrington, head of listed block trading at UBS Warburg.

The Dow closed down 234.99, or 2.4 percent, at 9,605.85. That was its lowest close since April 4, but still 216 points above its weakest finish for the year.

The Standard & Poor's 500 index fell 15.75, or 1.9 percent, to 1,090.65, its weakest finish this year and lowest close since October 1998.

The NASDAQ composite index fell the least of the three major benchmarks but still recorded its worst close since April 4, down 17.94, or 1.1 percent, at 1,687.70, about 49 points from its 2001 low point.

For the week, the Dow lost nearly 3.5 percent, the NASDAQ fell 6.5 percent and the S&P fell 4.2 percent.

The selling began early in the session on a Labor Department report showing the nation's unemployment rate soared to 4.9 percent in August -- its highest level in nearly four years -- and businesses slashed 113,000 jobs as the slumping economy continued to hammer the labor market.

Investors punished retailers Friday out of fear the slowdown would hurt consumer spending and confidence. Consumer spending accounts for two-thirds of the economy, and Wall Street is terrified that any decrease could put already fragile businesses in even worse positions than they are now.

Home Depot dropped US$2.60, or 6 percent, to US$40.95, while Wal-Mart lost US$1.15 to US$46.22.

"People are getting increasingly concerned that the consumer, who has held the economy up so far, will begin to retrench and the economy will lose what little momentum it has and this will turn into a recession," said Bob Barker, investment consultant at Dain Rauscher.

So far the US economy has managed to steer clear of a recession, commonly defined as two consecutive quarters of negative growth, though the nation's second quarter growth numbers were only 0.2 percent -- its slowest pace in eight years.

The pessimism extended to manufacturing and financial stocks. American Express slid US$0.88 to US$34.40 on fears a consumer and business slowdown would hurt the broader sector.

And Boeing tumbled US$3.54 or 8 percent to US$45.30 after a Morgan Stanley analyst downgraded the airplane manufacturer citing slowing orders.

Even pharmaceutical issues, usually a favorite with Wall Street in uncertain times, were weak. Merck lost US$1.23 to US$64.52.

Tech stocks also suffered, despite some positive news concerning two bellwethers. Intel fell US$0.21 to US$25.89, despite its reiteration late Thursday that its revenues would be in line with expectations.

And investors sold off Microsoft, sending it down US$0.62 to US$55.40, even though the Justice Department had indicated Thursday it would not seek to breakup the company because of anticompetitive behavior and would not interfere with the company's release of its Windows XP operating system next month.