Jobs report, unemployment pummel stocks

NEW YORK – Wall Street fell sharply Friday after the government’s much-anticipated employment report showed weaker-than-expected job growth and a rise in the unemployment rate. The Nasdaq composite index, also pummeled by a downgrade of Intel Corp., skidded more than 3.5 percent, while the Dow Jones industrials fell more than 1.5 percent.

The Labor Department’s report that employers raised payrolls by only 18,000 and that the nation’s unemployment rate rose to its highest level since November 2005 unnerved investors, who worried that a weakening job market will hurt consumer spending and tip the economy toward recession.

A better-than-expected reading on the nation’s service economy briefly pulled stocks off their lows but wasn’t enough to shake investors’ concerns.

Investors had been awaiting the jobs report for weeks as they tried to determine whether the economy would continue to benefit from robust consumer spending even as sectors like home construction, mortgage writing and manufacturing slow. Wall Street is concerned that areas of weakness could puncture growth if consumers can’t depend on a solid job market.

Manufacturers, construction companies and financial services companies all cut jobs during the month amid an anemic housing market. Retailers also made reductions.

The technology-focused Nasdaq fell for the sixth straight session and showed its steepest percentage decline since a market pullback on Feb. 27 last year. The Nasdaq declined 98.03, or 3.77 percent, to 2,504.65, in part after the downgrade of Intel, but also because its smaller-capitalization components are seen as more vulnerable in an economic slowdown.

For 2008, the Nasdaq is down 5.57; in all of 2007, the index rose 9.81 percent.

The Dow fell 256.54, or 1.96 percent, to 12,800.18, while the Standard & Poor’s 500 index declined 35.53, or 2.46 percent, to 1,411.63.

It was the steepest point drop for the Dow and the S&P 500 since Dec. 11. In 2008, the Dow is off 3.5 percent and the S&P is down 3.86 percent.

The Russell 2000 index of smaller companies fell 23.41, or 3.14 percent, to 721.60 and hit a fresh 52-week low.

Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.65 billion shares, compared with 1.32 billion traded Thursday.

Bond prices rose as investors sought the safety of government-backed debt after the employment reading. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.87 percent from 3.89 percent late Thursday.

Overseas, Japan’s Nikkei stock average fell sharply, finishing down 4.03 percent to its lowest level since July 2006 after being closed since the previous Friday for holidays. The pullback followed uncertainty on Wall Street about the U.S. economy and rising oil prices.

Britain’s FTSE 100 fell 2.02 percent, Germany’s DAX index fell 1.26 percent, and France’s CAC-40 fell 1.79 percent.