The Dow fell rapidly Friday after a quick pop of relief at the opening bell that only half a million jobs were lost in December. Market buzz had indicated the number could be as high as a million.
The Dow Jones Industrial Average was down more than 100 points, after opening up about 10-20 points. The Nasdaq and S&P 500 also declined.
Despite the fact that the numbers could've been worse, the numbers were staggering: Employers slashed 524,000 jobs from nonfarm payrollslast month, the Labor Department reported. Prior months were revised to show that an additional 154,000 jobs were lost between October and November than previously thought. That means a total of 1.9 million jobs were lost in the four months through December, and the total for all of 2008 was 2.6 million, the most since 1945.
The unemployment rate jumped to 7.2 percent, the highest in more than 15 years, from a revised 6.8 percent in November.
"Overall, a terrible report," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients. "[T]he only possible glimmer of light is that the maximum rate of fall of payrolls is hopefully not far off," he said.
Meanwhile, wholesale inventories shrunk for a third straight month as sales continued to plummet.
Asian stocks closed mixed, while European shares were in the red with more bad news coming from big economies in the area.
President-elect Barack Obama warned the U.S. economy could stay mired in recession for years without further bold action, but he gave few new details about a package of tax cuts and public-works spending which likely to cost over $800 billion.
An aide did say that the plan would be in part an overhaul of the current Troubled Asset Recovery Program to focus on getting credit markets flowing.
Chevron warned that its earnings would be "significantly lower"in the fourth quarter compared with the prior quarter due to the impact of the sharp drop in oil and gasoline prices.
The warnings also continued to trickle in from the retail sector: Coach slashed its guidance for the holiday quarter, citing lower traffic. Coach was among the few retailers that stuck to its guns and didn't do dramatic markdowns — any markdowns, actually — during the holiday season, while other retailers frantically lowered their prices.
Coach also joined the growing list of retailers that have said they will stop giving guidance.
The same-store sales numbers that came out Thursday were predictably dismal, though the surprise was that even Wal-Mart missed its target and issued a profit warning. Even luxury retailers like Coach and Tiffany are feeling the pinch as this recession has slashed individual's net worth across the board, regardless of demographic.
“Discretionary spending is DOA — dead on arrival,” declared Howard Davidowitz, chairman of retail-consulting and investment-banking firm Davidowitz & Associates.
Palm shares shot up more than 30 percent to about $6 after the gadget maker's new smartphone and operating system dazzled the analysts at the Consumer Electronics Show.
The new Palm "Pre," as it's called, appears "elegant, intuitive, sufficiently
differentiated, and ... a legitimate competitor to the iPhone," Avian Securities analyst Avi Cohen said.
Shares of its rivals were mixed: iPhone maker Apple skidded, while BlackBerry maker Research In Motion advanced, perhaps helped by news that President-elect Obama just can't live without his BlackBerry.
Citigroup became the first major bank to support a controversial plan to let bankruptcy judges alter mortgages in an effort to prevent more housing foreclosures and halt the economic decline.
Also in the banking sector, Lehman Brothers has agreed to spin off its merchant-banking business, which is comprised of two private-equity funds, according to a Reuters report.
A formal auction was run for the assets by Lazard on behalf of Alvarez & Marsal, Lehman's restructuring advisors, the source said.
In the Bernard Madoff scandal, the financial carnage is now spreading from charities and wealthy individuals to labor union pension funds, CNBC has learned. One union, the Carpenters local in Syracuse, N.Y., has lost the majority of the $100 million to $150 million it had in pension money because of its dealings with Madoff, people close to the matter said.
And under pressure from federal authorities, the Swiss bank UBS is closing the hidden offshore accounts of its well-heeled American clients, potentially allowing their secrets to spill into the open, the New York Times reported.
WEDNESDAY: Retail sales; import prices; business inventories
THURSDAY: PPI; weekly jobless claims; Philadelphia Fed survey; Fed's beige book
FRIDAY: CPI; industrial output; consumer sentiment