Wall Street limited its losses over the past week amid worries about economies in Europe and China, but Friday’s weak US job numbers hit home, leaving shaken investors in need of a tonic.
“This is a headline-driven market environment,” DA Davidson & Co chief market strategist Frederic Dickson said. “Positive headline news can drive instant upward market moves just as easily as negative headline news drives sudden market sell-offs.”
All three major indexes capped the holiday-shortened week on Friday with plunges of more than 3 percent in response to the worse-than-expected jobs report. The markets were closed on Monday.
The Dow Jones Industrial Average closed at 9,931.22, down 2.03 percent from last Friday.
The tech-rich NASDAQ composite fell 1.68 percent over the week, to 2,219.17.
The Standard & Poor’s 500 index, a broad measure of the market, lost 2.25 percent at 1,064.88.
“In the world of risk, it was looking like the US economy was going to turn out to be the more stable, but with a job report that disappoints expectations, it naturally has a pretty profound impact on the market,” Gina Martin at Wells Fargo Securities said.
The market “really was counting on the US to pull through,” Martin added.
The US Labor Department reported 431,000 nonfarm jobs were created last month, well below analyst expectations of 500,000.
Ninety-five percent of the new jobs were due to temporary government hiring for this year’s census, and the private sector created only 41,000 jobs, the majority of them temporary.
Wall Street had spent most of the week with its sights trained abroad, on Europe where fiscal problems are mounting, and on China, whose anti-inflationary moves are stirring fears of slowing growth in the engine driving the global recovery.
Those two sources of risk for the market, as well as the “psychological effect” of BP’s oil spill disaster in the Gulf of Mexico, weighed heavily on investors, Owen Fitzpatrick at Deutsche Bank said.
“The economy is still trending in the right direction but people are generally concerned with measures that have to be taken. We’ll continue to see slower growth in some regions, in particular Europe,” he said.
The euro tumbled along with stock markets Friday, falling below US$1.20 for the first time since March 2006.
Investors kept a close eye this week on trading in the currency shared by 16 European nations amid fears of contagion from the Greek debt crisis.
Markets were spooked when a spokesman for the recently elected Hungarian prime minister hinted the country could default.
But the shock US jobs report cast Wall Street’s spotlight on the US recovery from recession, which so far has been supported by massive government stimulus spending.
The employment report for last month “does not paint a picture of self-sustained growth in the private sector: absent the census hires and private-sector temp worker hires there was essentially no net job creation,” Heidi Shierholz of the Economic Policy Institute said.
The economic calendar in the week ahead is relatively light.
Investors will have a chance to digest the Federal Reserve’s latest report on the US economy on Wednesday. The Beige Book is published eight times a year and summarizes anecdotal information gathered by the central bank from all 12 Fed districts.
Thursday brings the weekly initial jobless claims and the April trade balance for the US.
On Friday, the US government reports retail sales for last month, an indicator of consumer spending that accounts for about 70 percent of economic activity.
“Retail sales are likely to remain weak for quite a while given the current trends in employment, and the negative wealth impact for depressed prices for homes and stocks,” Briefing.com analysts said in a note to clients.
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