Stocks Finish Deep in Red on Recession Fears
NEW YORK (TheStreet) -- Stocks finished sharply lower on Friday, driven down by elevated fears of another recession following the government's dire report on jobs and weakness in the banking sector.
The Dow Jones Industrial Average plummeted 253 points, or 2.2%, to settle at 11,240. The S&P 500 fell 30 points, or 2.5%, at 1174 and the Nasdaq lost 66 points, or 2.6%, at 2480.
The action has September off to a miserable start ahead of Labor Day weekend. Overall, the damage for the week wasn't too bad. The Dow closed down 0.4%, losing less than 45 points, the Nasdaq was flat, and the S&P 500 gave back 3 points. But the decline from intraday highs on Wednesday was more concerning with the Dow forfeiting 4.3%, the Nasdaq slumping 5%, and the S&P 500 down 4.6%.
The job market showed no growth for August, falling short of the 70,000-job increase economists had expected. Employers also added fewer positions in June and July than previously thought, the Labor Department said. About 85,000 workers were added in July, instead of 117,000. The unemployment rate was unchanged at 9.1% in August, as expected by economists surveyed by Thomson Reuters.Risk appetite dwindled ahead of the long weekend, as the weak jobs report increased recessionary fears and bearishness in the market. Safe havens like gold looked increasingly attractive. Gold for December delivery soared $47.80 to settle at $1,876.90 an ounce. Fears about the government's jobs report were building earlier this week. On Wednesday, Automatic Data Processing said companies added 91,000 workers, fewer than forecast. The Office of Management and Budget said Thursday that the unemployment rate will probably remain at 9% next year, when President Barack Obama will seek re-election. The office also forecast the U.S. economy to grow 1.7% this year and 2.6% next year. Obama will discuss ways to create jobs in a speech before Congress on Sept. 8. Thomas Berner, U.S. economist with UBS Wealth Management, said that he does not expect to see much of a rebound today as the jobs numbers have highlighted the risk that the economy is on the brink of another contraction. In particular, "what's disconcerting is the potential for a bad feedback loop between sentiment and behavior," he said.
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