Stocks Walloped Amid Economic Malaise
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Mounting evidence that the U.S. economy may be stalling spooked Wall Street on Friday, sending traders scuttling out of equities in search of safer assets.
As of 3:10 p.m. ET, the Dow Jones Industrial Average fell 155 points, or 1.2%, to 12742, the S&P 500 dipped 16.1 points, or 1.2%, to 1352 and the Nasdaq Composite slid 47.9 points, or 1.6%, to 2928.
The technology sector was the worst performer on the day by a wide margin, followed by industrial, material and energy shares. Defensive plays like consumer staples and utilities outperformed. The yield on the U.S. 10-year Treasury bond, seen as a safe haven, slid 0.06-percentage point to 1.546%. Meanwhile, volatility jumped 1.3% as tracked by the CBOE's VIX.
Tepid Job Growth
The pace of job growth has slowed down dramatically in recent months. The economy added a 80,000 jobs in June, according to a report from the Labor Department. That came in short of expectations of 90,000, and was insufficient to change the unemployment rate from 8.2%. In comparison, the economy tacked on 275,000 in the first month of the year. The jobs gain for May, however, was also revised up to 77,000 from an initially reported 69,000.
"There is a general sense of slowing in the economy where increasing uncertainty has led to softer data, but there is a risk that instead of a temporary soft patch this could be the beginning of a longer-lasting downshift in economic activity," analysts at Nomura wrote in a note to clients.
Digging into the data, the private sector added 84,000 jobs for the month, with the government shedding 4,000. The labor force participation rate, which is a gauge of what proportion of the population is employed or actively seeking employment held steady at a historically low level of 63.8%, suggesting many individuals are still staying out of the labor market.
More Fed Easing?
This has caused concern that the pace of economic growth, which clocked in at 1.9% in the first quarter, may not be fast enough to support robust jobs gains.
"Another month of ... weak job creation looks likely to encourage the Fed to seek more aggressive means of giving the U.S. economy a lift in the face of the darkening global economic environment," Markit Chief Economist Chris Williamson wrote in an e-mail.
The Federal Reserve already has interest rates at record low levels, is lengthening the maturity of its balance sheet and has completed two quantitative easing programs in a bid to spur growth. Other global economies are struggling as well: many eurozone nations are falling back into recession or at risk of falling back, while China is seeing a dramatic slowdown in the rate of expansion. To that end, the European Central Bank and the People's Bank of China both lowered interest rates on Thursday, while the Bank of England boosted its quantitative easing program.
Elsewhere, oil prices were once again under pressure amid concerns about a struggling global economy crimping demand for crude. The benchmark crude oil contract traded in New York slid $2.36, or 3.2%, to $84.45 a barrel. Wholesale New York Harbor gasoline dropped 1.8% to $2.716 a gallon.
In metals, gold slumped $30.50, or 1.9%, to $1,579 a troy ounce.
The Euro Stoxx 50 plummeted 2.2% to 2236, the English FTSE 100 slipped 0.53% to 5662 and the German DAX fell 1.9% to 6410.
In Asia, the Japanese Nikkei 225 slumped 0.65% to 9021 and the Chinese Hang Seng edged lower by 0.04% to 19801.