The Great Bush Depression started today -- DJIA off 395 points, unemployment skyrockets
- From: Commander Cody and the New Lost Planet Airmen <pilgriminabarrenland@xxxxxxxxxxx>
- Date: Fri, 6 Jun 2008 17:00:18 -0700 (PDT)
NEW YORK (CNNMoney.com) -- Stocks tanked Friday, with the Dow
industrials shedding 395 points, after oil prices spiked more than $11
a barrel and the May jobs report showed a big jump in the unemployment
rate.
Bond prices surged, as investors sought safety in government debt,
while the dollar tumbled versus the yen and euro.
The Dow Jones industrial average (INDU) lost 395 points, or 3.1%, its
biggest one-day decline on both a point and percentage basis since
February of 2007, at the start of the subprime mortgage crisis.
The broader Standard & Poor's 500 (SPX) index lost 3.1%, while the
Nasdaq composite (COMP) lost 3%. Both saw their biggest one-day
declines on both a point and a percentage basis in more than four
months.
The unemployment rate shot up to 5.5% in May from 5.0% in April, the
government reported, marking the biggest one-month surge in over 20
years. The report was a clear indication that the economy could be in
a recession after all, despite some recent bets that one could be
narrowly avoided.
As rattling as the unemployment number was, the stock market was even
more spooked by the spike in oil prices, said Bill Stone, chief
investment strategist at PNC Wealth Management.
"I think more than anything, it's the shock of oil prices being up
this substantially two days in a row," Stone said.
Crude jumped more than $16 in two sessions, with prices settling up
$10.75 to $138.54 a barrel Friday on the weak dollar and in response
to a Morgan Stanley note that said oil could hit $150 a barrel by July
4.
The spike exacerbated worries about consumer spending, already
stretched as gas prices near a national average of $4 a gallon.
"You're definitely seeing the fear trade today, with the dollar down,
commodity prices up and bonds rallying," Stone said.
Stocks could be vulnerable to further declines in the week ahead,
after the S&P 500 closed below a key technical level that has
previously given a floor to the selling. Traders said stocks could be
in danger of moving back to the lows of March and January, which were
seen as something of a bottom after months of stock declines.
Jobs market deteriorates: The unemployment rate surged to 5.5% from
5.0%, beating forecasts for a rise to 5.1% and showing the biggest one-
month jump since 1986.
The spike really caught people by surprise, said Stuart Hoffman, chief
economist at PNC Financial Services Group. He said the report makes it
clear that at least for so-called Main Street and the labor market,
"we are in a recession, regardless of how we economists define it."
He was referring to the fact that GDP has been limping higher and the
economy has not been officially declared to be in a recession by the
National Bureau of Economic Research.
However, with non-farm payrolls dropping for a fifth consecutive
month, it feels to many people like it's a recession, he said.
Employers cut 49,000 from their payrolls, the report showed, versus
forecasts for a decline of 60,000.
Dollar falls, oil spikes: The dollar continued its slide versus the
euro on the weak jobs report and comments Thursday that the European
Central Bank could potentially raise interest rates. The dollar also
tanked versus the yen.
The dollar's decline contributed to a rally in dollar-traded commodity
prices, with U.S. light crude oil for July delivery settling at
$138.54 a barrel, a jump of $10.75. The increase was the biggest
single-day price gain since record-keeping began in 1983 - taking out
the previous session's record.
Oil prices spiked to a record trading high of $139.12 after the close,
before pulling back a bit.
Gold and other commodities rallied too. COMEX gold for August delivery
rose $23.50 to settle at $899 an ounce.
.
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