Dow Ends Below 10,000, in Correction Territory
The Dow fell below 10,000 Friday after a sharp selloff that left all three major indexes in correction territory amid worries about a disappointing U.S. jobs report and possible default by Hungary.
"You had everyone coming into this week putting that re-risk trade back on ahead of these job numbers and they just took it right back off the table right now," Steve Grasso, a trader with Stuart Frankel, said on CNBC. "I do think we're going to deteriorate on a Friday and no one is going to step in front of that trade."
The Dow Jones Industrial Average lost 323.31, or 3.2 percent, to end at 9,931.97, its lowest close since February. Industrials led the decline, with Caterpillar and Boeing among the biggest laggards on the Dow. Materials and financial stocks also took a hit.
All three major indexes are in correction territory, defined as being down more than 10 percent from its recent high. The Dow is now down 11 percent from its April high, while the S&P 500andNasdaqare down 12 percent from those levels.
Volume was heavy, with more than 1.6 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers, roughly 10 to 1. The CBOE volatility indexspiked more than 20 percent, topping 35.
The market's mood started off sour as a carryover from Europe as investors there worried about rumors that SocGen may be having trouble with its derivatives operations and news that Hungary is very close to defaulting on its debt.
The euro fell below $1.20against the dollar to its lowest level in more than four-years amid debt worries in the euro zone.
Piling on was the U.S. jobs report, which showed employers added 431,000 jobsto nonfarm payrolls in May, but 411,000 of those were temporary census workers. The private sector added just 41,000 jobs, well short of the more than 500,000 economists had expected. The unemployment rate, however, fell to 9.7 percent from 9.9 percent in April.
"The two areas of potential vulnerability for the economy remain payrolls and housing and they're both staggering a good deal," Art Cashin, director of floor operations at UBS, said on CNBC this morning. "From a market standpoint, I think we're going to switch over and start issuing Dow 10,000 helmets!"
Still, one encouraging sign on the jobs frontcame Thursday: Indeed.com, a search engine for job listings, reported that listings were up in all 12 industries the company tracks, with the biggest jumps in transportation, retail and hospitality listings. The company said listings should be viewed as a precursor to the official numbers as trends show up in their numbers first before the government's numbers.
Oil prices fell, settling out the week at $71.51 a barrelwhile gold rose to $1,216.20 an ounce.
BP shares fell more than 5 percent, after Standard & Poor's cut the oil firm's credit rating by one notch to AA-minus from AA, citing the challenges and costs of capping the oil wellleaking into the Gulf. Earlier this week, BP shares saw their largest intraday drop in almost 20 years.
In a conference call with shareholders this morning, BP said it would meet its obligation to shareholders who receive a dividend but didn't commit to maintaining a dividend going forward.
President Obama lashed out at at BP for failing to scrap the dividend, saying the oil giant shouldn't be "nickel and diming" Gulf residents while handing out billions to shareholders.
Goldman Sachs shares lost over 1 percent after Rochdale analyst Dick Bove cut his price target on the stock to $180 from $200 and his earnings estimate to $22.70 a share from $23 a share, citing the European debt crisis as the biggest factor. Earlier, Goldman shares had risen amid rumors of a settlement with the SEC.
Other financials were also lower, with Citigroup , Bank of America and JPMorgan all down more than 2 percent.
McDonald's shares fell after the fast-food chain had to recall 12 million "Shrek"-themed glasses because they contained the toxic metal cadmium.
Walmart announced a new $15 billion share repurchase planat its annual shareholders meeting Friday. The new program comes after the company repurchased about $10 billion in shares over the past year.
Boeing said it plans to boost international salesto offset weakness in the U.S. as the government reins in defense spending.
Sprint's new 4G phone goes on sale today. Apple is expected to debut a new version of the iPhoneon Monday but the early buzz is that it may not be a dazzler. Brokerage Susquehanna raises its price target on the iPhone maker to $325 from $300.
And, Caris raised its rating on Oracle to "buy" from "above average."Despite a sharp drop in markets overall, health insurers bucked the trend and made a strong move upward.
Shares of WellPoint and United Health rose to lead the S&P 500 as investors went bargain hunting amid a long slide in the sector in the wake of the health care reform.
Meanwhile, pharma stocks such as Johnson & Johnson and Bristol-Myers fell as their price targets were cut by brokerages Credit Suisse and Jefferies, respectively. Martek Biosciences shares surged more than 15 percent after the firm beat earnings expectations and projected its full-year earnings would top forecasts.
With tensions in the market high, investors have been flocking to cash and looking at other safe-haven plays like gold.
Ethan Anderson of Rehmann Financial, said forget gold — the real safe haven is consumer staples.
"We feel that a lot of the consumer staples companies, they're much less prone to having bubbles. Gold is always talked about in the format of pricing, but people forget that it was just recently that gold hit a new high after 30 years."
Three top Federal Reserve officials said on Thursday it may soon be time to begin raising interest rates as the economic recovery gains momentum, despite persistently high unemployment. Thomas Hoenig, president of the Kansas City Fed, argued the U.S. central bank should raise benchmark borrowing costs from near zero to 1 percent by the end of summer.
Next week, investors will be closely watching comment from Fed Chairman Ben Bernanke and a handful of other Fed officials to see if they offer any insight on interest rates, particularly after Canada became the first G-7 nation to do so.
Plus, another round of Treasury auctions are planned for next week, Apple will hold its developers' conference, McDonald's releases May sales and Caterpillar holds its shareholders meeting.
On Tap for Next Week:
SUNDAY: Buffett lunch auction
MONDAY: Apple developers conf.; conference board employment trend index; consumer credit
TUESDAY: Primary & special elections; NFIB small business optimism index; McDonald's May sales data; 3-yr note auction
WEDNESDAY: Weekly mortgage apps; wholesale trade; 10-yr note auction; Fed's beige book; Bernanke speaks; Fed's Lacker speaks; Caterpillar shareholders meeting
THURDSAY: International trade; weekly jobless claims; quarterly services survey; 30-yr bond auction; Treasury budget; Earnings from: Del Monte Foods, National Semiconductor
FRIDAY: Fed's Plosser and Kockerlakota speak; retail sales; consumer sentiment; business inventories; S&P index rebalancing details announced
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