News of a rapidly weakening job sent stocks falling Friday as investors feared that the recession will be deeper and more prolonged than many have expected. The major indexes were all down more than 1 percent and the Dow Jones industrials fell 180 points.
The Labor Department's report that employers slashed 533,000 jobs in November came in much higher than the 320,000 that economists forecast. The job losses were severe enough to add to expectations that Washington will have to take even bigger steps to boost the economy.
Although stocks fell after the report, analysts said Friday's retreat likely would have been steeper if the market hadn't tumbled in the final hour of trading Thursday in anticipation of a weak reading.
"What we're seeing here is the market telling you that a downward drop in employment was somewhat expected," said Craig Peckham, equity trading strategist at Jefferies & Co.
"In a kind of paradoxical sense, the really ugly employment numbers probably helped the case for more help from Washington, whether it's through the broader stimulus plan or more targeted industry measures."
Job losses were widespread, hitting manufacturing, construction, retail, financial and other sectors. It was the biggest monthly loss of jobs since 1974.
While the rise in the unemployment rate wasn't as steep as the 6.8 percent forecast, investors clearly believe the employment outlook remains bleak - especially as the layoffs keep coming. On Thursday, bellwether companies like AT&T Inc. and DuPont Co. announced they were cutting thousands of jobs.
The fear on Wall Street is that a rising unemployment rate will, among other things, lead to a more severe pullback in consumer spending, which is a crucial component to helping the economy rebound. Weak retail sales reports for the month of November released Thursday added to these concerns.
"The news is consistently dreadful and is likely to remain so for some time as layoffs continue and economic reports come in," said Gary Townsend, president and chief executive of private investment group Hill-Townsend Capital Inc.
In midmorning trading, the Dow Jones industrial average fell 180.40, or 2.15 percent, to 8,195.84 after falling 216 points Thursday.
Broader stock indicators also declined. The Standard & Poor's 500 index fell 17.93, or 2.12 percent, to 827.29, and the Nasdaq composite index fell 24.08, or 1.67 percent, to 1,421.48.
The Russell 2000 index of smaller companies fell 8.42, or 1.92 percent, to 431.11.
Five stocks fell for every one that rose on the New York Stock Exchange, where trading volume came to a moderate 302.2 million shares.
Bond prices showed modest movements Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, inched up to 2.57 percent from 2.56 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.02 percent from below 0.01 percent late Thursday, but still indicated extreme fear among investors.
The dollar rose against other major currencies, while gold prices fell.
Light, sweet crude fell $1.71 to $41.96 a barrel on the New York Mercantile Exchange. Concerns about the economy and weakening energy demand have kept oil prices down near four-year lows. The price of oil has fallen a staggering 70 percent since peaking at $147.27 in July.
Independent investment strategist Edward Yardeni said Friday's employment snapshot confirms the nation is mired in a difficult recession but that the extent of the weakness likely will galvanize government officials.
"The number was a shocker to such an extent that it's clearly going to require an enormous stimulus response from Washington," he said. "Cleary the Fed and the Treasury are going to move even faster."
The Federal Reserve and the Treasury have been taking unprecedented steps to revive the economy since the mid-September bankruptcy of Lehman Brothers Holdings Inc. Other programs have sprung from the government's $700 billion bailout of the banking sector. The Treasury said Thursday it is considering a plan to encourage banks to make mortgage loans at low rates. That could help patch up the troubled housing market, which many analysts say is crucial to any economic recovery.
Wall Street has reacted with both optimism and indifference in recent months as policymakers have tried to revive troubled credit markets and stabilize wobbly banks. Some analysts have been hopeful that relative quiet in the markets for more than a week portends a return of some stability because of the government's efforts, while others warn that the volatility in the market will continue.
"The markets are, in my view, acting not stable at all but with excessive volatility and unpredictability," Townsend said. "It's a very difficult market to invest into and a very difficult market to trade."
Part of investors' uncertainty centers on the automakers. Investors are observing a second day of congressional hearings with the heads of Detroit's top three automakers, who are appearing on Capitol Hill in an effort to save their troubled industry.
General Motors Corp., Ford Motor Co. and Chrysler LLC are collectively seeking $34 billion in emergency funding. While the market largely expects the companies will win some sort of government aid, support for the troubled carmakers isn't assured. Friday's jobs report likely put added pressure on lawmakers to offer a lifeline that would let the companies avoid bankruptcy.
GM fell 5 cents, or 1.2 percent, to $4.06, while Ford rose 9 cents, or 3.4 percent, to $2.75. Chrysler isn't publicly traded.
Meanwhile, Merrill Lynch & Co. shareholders approved the investment bank's sale to Bank of America Corp. early Friday, in a move that will create the nation's largest financial services firm.
Bank of America agreed to buy Merrill for $50 billion after the collapse of rival investment firm Lehman Brothers Holdings Inc. in September raised doubts about the viability of independent investment banks in general. The value of the all-stock deal has since fallen to about $20 billion, based on Bank of America's Thursday closing price of $14.34.
Bank of America shareholders were set to vote on the acquisition at 11 a.m. EST. The deal is expected to close during the first quarter.
Optimism that buoyed some overseas markets following massive interest rate cuts across Europe Thursday deflated following the report on U.S. jobs. In afternoon trading, Britain's FTSE 100 fell 2.26 percent, Germany's DAX index fell 4.71 percent, and France's CAC-40 declined 5.72 percent. Japan's Nikkei stock average slipped 0.08 percent on the day.
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