Dow 12,119 (-2.22%) S&P 1,278 (-2.46%)
Despite the jelly doughnuts bouncing around lower Manhattan on “National Doughnut Day,” there’s no sugarcoating this news. The stock market got shot down today and the Labor Department’s monthly employment report is holding the smoking bazooka. The disappointing US jobs news sent stocks to their worst losses of the year and wiped out what remained of the Dow’s 2012 gains. Concerns over Greece staying in the Eurozone ahead of mid-June elections and the slowdown in China’s economy continue to weigh heavily on investors. But this morning’s steamy heap of American data to cap off a 4-day holiday week took front & center stage. The Dow free-fell 150 points within minutes of opening and finished down 275 points for a 2.22% loss.
Labor Department reports 69,000 jobs added in May, unemployment up to 8.2%
The eagerly-anticipated Labor Department employment report showed only 69,000 non-farm jobs added to the economy in May, the lowest gain in a year. This number is well below both the 150,000 forecast by economists and the 133,000 calculated by payroll-tracking company ADP yesterday. On top of this, the unemployment rate, the percentage of unemployed Americans actively looking for jobs, up-ticked for the first time since June 2011. Bearish analysts point out that this number doesn’t even include all the individuals who have dropped out of the workforce. The Labor Department rubbed more salt in the wounds by revising its April report, scratching the number of jobs added that month from 115,000 to 77,000. This monthly government employment report is closely watched by investors who consider it the official labor market barometer. Today’s release furthered concerns that the US economic growth that kicked off 2012 may be stalling.
Demand sends 10-Year Treasury bonds to historically low yields as investors seek “safe havens”
Our government has a history of spending matched only by this season’s cast of Real Housewives of New Jersey. The federal government’s debt is $15.7 trillion, and today it was rewarded with a lower interest rate on its credit card than ever before. The yield on 10-year Treasury bonds hit an ALL TIME low of 1.44% today. This means investors will take a 1.44% annual return in exchange for lending to the federal government. The yield moves in the opposite direction to the price of a bond, and fearful investors bid up the price of Treasurys. Confidence in the global economy is grim, so investors are accepting paltry returns in exchange for the ultimate security of the safe haven assets, like US “Treasurys,” German “Bunds,” and the UK “Gilts.” The yields on these respective 10-year government bonds all hit all time lows today on the growing demand.
Dow Jones has largest drop of 2012, all 10 S&P sectors fall
Those stocks must vulnerable to economic swings fell the most, namely construction, housing and financials stocks, with Bank of America (BAC) down 4.5%. But all ten business sector indices of the S&P 500 stock index dropped and Facebook (FB) added insult to injury with a 6.3% fall (it’s now down 27% from its opening $38 IPO price two Fridays ago). Red was the color of the day.
- The Dow’s record breaking 8.5% gain in the first quarter of this year has been obliterated by recent economic queasiness, and we’re now back to flat for 2012. Will Fed Chairman Ben Bernanke, the patron saint of econ growth, finally initiate the third round of Quantitative Easing (“QE3″) to ensure the recovery continues?
- Do something this weekend to make your mind forget the market pain….
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