Wall Street Adds to Losses

Stocks in New York continue to trade lower as investors take in data for the worst year for unemployment since 1945.
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Updated from 9:45 a.m. EST

Stocks in New York traded down sharply midmorning as the U.S. government reported the final jobless data for 2008 -- the worst year for unemployment in more than 60 years.

The

Dow Jones Industrial Average

was losing 127 points at 8615, and the

S&P 500

was off by 16 points at 893. The

Nasdaq

was down 37 points at 1580.

The

U.S. lost 524,000 jobs in December

, in line with estimates, according to highly watched data from the Labor Department. The figure was considerably better than a forecast released by ADP Employment Service earlier in the week, which estimated private-sector employment fell by 693,000 in December, suggesting the nonfarm payroll numbers will have declined much more severely than expected.

The unemployment rate, however, was worse than expected, rising to 7.2%. For all of 2008, the economy lost a net total of 2.6 million jobs, the most since 1945.

The release of the data "reminds us that the economy is facing major headwinds as we start the New Year," says Michael Sheldon, chief market strategist at RDM Financial Group, in an email. Moreover, he says, news on the labor front is likely to continue getting worse before it gets better.

If there's a silver lining, you might argue that the jobs report reflects the severe credit crises that we experienced late last year, but doesn't yet account for an of the recent improvements in the credit markets, or the large upcoming stimulus plan.

Indeed, economic data and monetary policy are becoming more peripheral as investors are already baking in the expectation for some sort of stimulus package, says Chris Johnson, CEO and chief investment strategist of Johnson Research. Rather, he says, focus has shifted to the first earnings season of the year, and we are starting to see companies like

Chevron

(CVX) - Get Report

,

Alcoa

(AA) - Get Report

and

Intel

(INTC) - Get Report

adjusting their outlooks for 2009. As those roll in, we have a good chance of retesting November lows, says Johnson.

The recession looks to be longer and more severe than originally forecast, said Boston

Federal Reserve

President Eric Rosengren, in an address at the Massachusetts Mortgage Bankers Association. "Still, there are indications that the second half of the year will show improvement," he said.

Senate Democrats said late Thursday that they'd reached an agreement with

Citigroup

(C) - Get Report

to support a bill that would allow bankruptcy judges to alter the

terms of mortgages

owed by consumers filing for bankruptcy, aiming to alleviate foreclosures for those consumers.

Meanwhile, the private-equity arm of collapsed investment bank

Lehman Brothers

has reached an agreement to spin out into an independent firm, taking in a new investment from luxury-goods billionaire Johann Rupert, according to

The Wall Street Journal

.

In other corporate news, according to the

Journal

,

Yahoo!

(YHOO)

is wrapping up its search for a CEO. The

Journal

reports that final candidates include Carol Bartz, former CEO of

Autodesk

(ADSK) - Get Report

.

Retail numbers rolled in much more anemic than expected on Thursday, sending the major indices sharply lower, but stocks in New York pared losses after the president elect delivered a pitch for his economic recovery plan.

On Friday, the dollar declined against other major currencies. Oil prices fell $1.63 cents to $40.07 a barrel, while gold fell $6.50 at $848 an ounce.

Longer dated Treasuries were mixed; the 10-year note was falling 1/32 to yield 2.4%, and the 30-year was down 9/32, yielding 3.1%.

Overseas, the FTSE in London and the DAX in Frankfurt were falling Friday. In Asia, Japan's Nikkei and Hong Kong's Hang Seng ended with losses.

Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. AP contributed to this report.