What a Week: Stocks Scalded by Oil as Jobs Growth Flops

Ouch. What else is there to say for everyone but holders of S&P 500 put options and 10-year Treasury notes?

After Friday's jobs report came in lower than anyone had projected, with the economy adding just 32,000 jobs in July, the stock markets took all day to finally hit bottom. And oh what a bottom it was.

The Nasdaq tumbled 2.5% Friday, ending the week down 5.9% at 1776.89, and about where it hit bottom last fall. In percentage terms, it was the second-biggest loss of the year topped only by the 2.52% drop of Feb. 4.

The S&P 500 lost 1.6% for the day to 1063.97 -- ending the week down 3.4%. The Dow Jones Industrial Average dropped 1.5% Friday to 9815.33, ending the week down 3.2%.

With the major averages finishing near the lows for the day -- and at their lowest levels of 2004 -- there weren't many signs of a bottom as the weekend beckoned. Last Friday, I suggested the positive trend could be sustained absent higher oil prices or jitters from a poor payrolls report. Well, the market got both and the bottom didn't hold.

Now all eyes turn toward Tuesday's meeting of the Federal Open Market Committee. The Fed is all but certain to hike rates another 0.25 percentage points to maintain the "measured" pace of increases it warned of starting in May.

Fixed-income markets signaled that the weak jobs number might put the Fed on hold for its next meeting in September. Until the past week or so, traders expected the Fed to raise its benchmark rate three times by year-end from the current 1.25% to 2%. Now the expectation is for two hikes to 1.75%.

The December futures contract for the eurodollar rate, which is usually about one-quarter of a percentage point above the federal funds rate, has declined from about 2.5% at the beginning of last week to 2.11% on Friday. That represented expectations of Greenspan's rate hikes for the rest of the year, dropping from 0.75 percentage points to 0.50 or less.