As Economic Recovery Falters, Wall Street Sells Off

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Gloomy data suggesting the U.S. economic recovery may be veering off course darkened traders' sentiment, sending the markets tumbling in the worst weekly showing of the year. 

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The Dow Jones Industrial Average slid 168 points, or 1.3%, to 13038, the S&P 500 fell 22.5 points, or 1.6%, to 1369 and the Nasdaq Composite dipped 68 points, or 2.3%, to 2956.

For the week, the Nasdaq skidded 3.7%, the S&P 500 dropped 2.4% and the Dow fell 1.4%. It was the worst week of 2012 for the S&P 500 and Nasdaq. 

The energy, technology, materials and industrial sectors took the worst hit on the day. At the same time, the utilities sector, often seen as a defensive play, was in the green. Traders also bid up safe-haven Treasury bonds, pushing the yield on the 10-year down 0.046-percentage point to 1.880%.

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In a sign of the breadth of the selling, volatility lurched 8% higher and there were six trades in declining shares for each one in an advancing share on the New York Stock Exchange. 

Oil prices plunged $4.05, or 4%, to $98.49 a barrel amid fears a slowdown in the U.S. economic recovery could weaken demand. Crude shed more than 6% on the week -- the worst drop since September. Wholesale gasoline, meanwhile, dropped 5.4% for the week. 

Economic reports this week have painted a murky picture of the trajectory of the world's biggest economy. One closely-eyed report showed the manufacturing sector expanding at an accelerating pace, but then another showed the recovery in the services segment is slowing down. 

The monthly employment report from the Labor Department is widely considered to be on of the most important pieces of data on the U.S. economy. The economy added 115,000 jobs in April, far weaker than the 170,000 gain that was expected. The unemployment rate fell 0.1-percentage point to 8.1% for the month, compared to expectations of no change. The March gain was also revised up to 259,000 from 240,000.

The so-called labor force participation rate, which tracks the proportion of the working-age population either employed or actively seeking employment, fell to 63.6% -- the lowest since 1981. That means more people actually left the labor force over the course of the month. 

"Ignoring the specifics of today’s report, the larger theme of slower job creation should now be embedded," Dan Greenhaus, chief global strategist at BTIG wrote in an e-mail.

Michael Gapen, an economist at Barclays Capital said in a note to clients that he does "not believe the April report signals conclusively that the labor market has taken a turn for the worse." He also noted that the weak data will likely not provide a sufficient impetus to cause a shift in the Federal Reserve's policy at its June meeting. 

Reports on major economies in the eurozone broadly came as a disappointment on the day. The services sector in Germany, France, Italy, and the currency bloc as a whole continue to contract amid strong headwinds from the debt crisis. This weekend, there will be important elections in France and Greece that analysts say could upset the fragile political system there and put previous agreements in peril. 

The elections have "the potential to escalate the [eurozone] crisis by raising anxieties about fiscal discipline," Markit Chief Economist Chris Williamson wrote in an e-mail. 

In metals, gold gained $10.40, or 0.64%, to $1,645 a troy ounce. 

Foreign Markets

European blue chips sold off by 1.7%, the English FTSE 100 tumbled 1.9% to 5655 and the German DAX fell 2% to 6561. 

In Asia, the Japanese Nikkei 225 rose 0.31% to 9380 and the Chinese Hang Seng slid 0.77% to 21086.

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