NEW YORK – Stocks dropped Friday after another spike in oil prices overshadowed a report that the unemployment rate fell to its lowest level in nearly two years.
Crude oil rose 2.5 percent to $104.42 a barrel, the highest level since September 2008, after fighting in Libya escalated. Markets have been rattled over the past two weeks as higher oil prices threaten to undermine the economic recovery by increasing transportation and production costs.
Higher energy prices sent stocks lower despite news that the U.S. job market is improving. The Labor Department reported that the unemployment rate dipped to 8.9 percent in February from 9 percent the previous month. The rate has dropped for three months in a row and is now at its lowest level since April 2009. Employers added 192,000 jobs in February, the fastest pace in almost a year.
“They’re tugging at each other, employment and oil,” said Jack Ablin, chief investment officer of Harris Private Bank. “Oil is high enough that it has to be a concern. The longer it remains at this level the greater the chance that it upends our recovery.”
The Dow Jones industrial average dropped 88.32 points, or 0.7 percent, to 12,169.88. The Dow had been down as many as 178 points earlier.
The Standard & Poor’s 500 index fell 9.82, or 0.7 percent, to 1,321.15. The Nasdaq composite index fell 14.07, or 0.5 percent, to 2,784.67.
All 10 company groups that make up the S&P index fell. Financial companies fell 1.3 percent, the largest drop. Citigroup Inc. fell 3 percent and Goldman Sachs Group Inc. fell 2.1 percent after Bank of America analysts trimmed their earnings forecasts for the two banks. Analysts noted that they expect the turmoil in the Middle East will make institutional investors more cautious with their cash, leading to a drop in trading revenues.
Each index eked out small gains for the week after falling the week before. The Dow had the largest move, inching up 0.3 percent.