NEW YORK A dismal jobs report caused stocks to plunge Friday.
The Dow Jones industrial average dropped 253 points, or 2.2 percent, wiping out its gains for the week. All 30 stocks in the average fell.
No jobs were added in the U.S. last month, the government said early Friday. It was the worst employment report in 11 months and renewed fears that another recession could be on the way. The yield on the 10-year note briefly fell below 2 percent and gold jumped $48 an ounce as cash flowed into investments seen as less risky than stocks.
Its certainly ugly, said Jeff Kleintop, chief market strategist at LPL Financial.
European markets followed U.S. stocks lower. They were already down on reports that talks between Greece and international lenders over that countrys debt crisis were breaking down. Germanys DAX closed down 3.4 percent; Frances CAC-40 lost 3.6 percent.
The lack of hiring in the U.S. last month surprised investors. Economists were expecting 93,000 jobs to be added. Previously reported hiring figures for June and July were also revised lower. The average work week declined and hourly earnings fell. The unemployment rate held steady at 9.1 percent. The rate has been above 9 percent in all but two months since May 2009.
Kleintop said the jobs report didnt change his view that the economy was headed for a stretch of weak economic growth, not a recession. He said the figures were likely skewed by unusual events that may have made employers reluctant to add jobs in August.
The Labor Departments report relies on data collected from surveys of households and businesses in the second week of August. Thats right after Standard & Poors removed the countrys AAA credit rating and fears mounted that Europes banking crisis could spread to the U.S. Television screens were filled with images of riots in London.
Im not surprised that businesses werent doing too much hiring in that environment, Kleintop said.
The Dow Jones industrial average lost 253.31 points to close at 11,240.26. It was the biggest fall in two weeks. The Standard & Poors 500 index fell 30.45, or 2.5 percent, to 1,173.97.
The Dow fell 0.4 percent for the week, the S&P 0.2 percent. Both indexes have fallen five of the past six weeks.
The Nasdaq composite fell 65.71, or 2.6 percent, to 2,480.33. The technology-heavy index eked out a gain of 0.48 point for the week.
Cash poured into Treasurys and gold, assets believed to be safer bets during a weak economy. The yield on the 10-year Treasury note fell to 2.00 percent, and briefly traded below that level. It was 2.14 percent shortly before the report came out. Yields fall when demand for bonds increases.
The price of gold rose 2.8 percent to $1,880. Fears that a stalling economy could reduce demand for oil and gasoline pushed benchmark crude oil down $2.48, or 2.8 percent, to $86.45.
Trading volume was thin ahead of the Labor Day weekend at 3.8 billion shares, 11 percent below the average volume for the year. Low volume can result in larger-than-usual moves in stock indexes. When fewer traders are active in the market, large buy and sell orders can move stock prices more than they would on a typical day.
The VIX, a measure of stock market volatility, rose 6.6 percent to 34. The index has fallen from a recent high of 48 on Aug. 8, when the Dow lost 634 points following a downgrade of the U.S. governments credit rating. The VIX traded below 20 for most of the year.
Fears of another recession led to wild market swings last month as global growth slowed and Europes debt crisis flared up again. Consumer confidence plunged in August to a two-year low. A key category that tracks business investment fell sharply in July. Recent data were more encouraging, suggesting weak but steady economic expansion.
Bank of America Corp., the countrys largest bank, sank 8 percent after The Wall Street Journal reported that regulators had asked it to develop emergency plans because of its sagging share price and the sluggish economy. Bank of America is down 45 percent this year, largely on concerns about legal costs related to shoddy mortgage investments that it sold.
Other big banks dropped on separate reports that the government is preparing to sue some of them, also over mortgage investments they sold that lost value when the housing market collapsed. The Federal Housing Finance Agency, the regulator of Fannie Mae and Freddie Mac, announced the lawsuit against 17 banks after the market closed.
The FHFA says the banks lied about the quality of loans that they pooled together and sold as securities. Goldman Sachs Group Inc. and Morgan Stanley fell 5 percent. Wells Fargo & Co. and JPMorgan Chase & Co. each lost about 4 percent.
Peter Tchir, a former trader who now runs the hedge fund TF Market Advisors, said stocks will likely be dragged down in the coming weeks by high unemployment, weak spending and a possible default by Greece, which he sees as increasingly likely.
I expect that the S&P will go back below 1,100 sometime in September, he said. Whether we hit a recession or a contraction or not, itll remain weak, and Europe is going to hit a wall where the banks are going to have to take losses. That would also hurt U.S. banks, he said.
Netflix Inc. plunged 9 percent after talks collapsed with a key provider of movies and TV shows. Starz Entertainment said late Thursday that it wont renew a contract that allows Netflix to stream recently released movies and shows.
The Dow, S&P and Nasdaq all had their worst August since 2001 as economic fears and instability in financial markets and European banks added to investors worries.