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U.S. unemployment rate hits a 26-year high. Investors sell stocks, move to bonds
Published on Friday, Jul 03, 2009
Associated Press
NEW YORK: A dour report on job losses in June sent stocks sharply lower Thursday.
Major stock indexes fell more than 2.6 percent after the government said the U.S. unemployment rate hit a 26-year high.
The Dow Jones industrials lost 223.32, or 2.6 percent, to 8,280.74, the lowest close since May 22. It was the average's worst day since April 20.
The Standard & Poor's 500 index fell 26.91, or 2.9 percent, to 896.42 and the Nasdaq composite index fell 49.20, or 2.7 percent, to 1,796.52.
Oil fell $2.58, nearly 4 percent, to $66.73 a barrel.
As investors sold off stocks, they moved into the safety of bonds, pushing Treasury yields lower.
The stock market rallied furiously this spring off 12-year lows beginning in early March on hopes for a recovery, but the upward momentum stalled in mid-June as doubts began to emerge about whether the economy had really found a bottom. The June jobs report was the latest blow to the market's confidence.
''There's more and more evidence mounting against this rally continuing,'' said Doug De Groote, a managing director at United Wealth Management. Consumers are likely to lead the nation out of the ongoing recession, but that won't happen if more people are losing their jobs, he said.
Shares of consumer products companies were among the hardest hit Thursday.
''This is part of the market recovery,'' said Roy Williams, CEO of Prestige Wealth Management. ''You're going to get bad news.''
As stock prices fell across the board, other signs of investor unease emerged. Treasury prices rose, driving the yield on the 10-year note down to 3.50 percent from 3.54 percent late Wednesday.
Meanwhile a gauge of volatility in the stock market, the Chicago Board Options Exchange Volatility Index, or VIX, rose 1.66, or 6.3 percent, to 27.88.
An upbeat report about May factory orders was not enough to boost traders' confidence amid the weak employment numbers. The Commerce Department said total orders rose 1.2 percent in May, better than the 0.8 percent increase predicted.
Markets began the third quarter on Wednesday with gains after getting data on manufacturing and housing. Traders were encouraged by a report showing more stable manufacturing activity and another indicating the fourth straight monthly rise in pending home sales.
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