Stocks plummet on weak jobs report

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.

"It's 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 country's debt crisis were breaking down.

Kleintop said the jobs report didn't 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 Department's report relies on data collected from surveys of households and businesses in the second week of August. That's right after Standard & Poor's removed the country's AAA credit rating and fears mounted that Europe's banking crisis could spread to the U.S. Television screens were filled with images of riots in London.

"I'm not surprised that businesses weren't 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 & Poor's 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.

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.

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, it'll 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.

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.

This story was originally published September 3, 2011 at 12:00 AM with the headline "Stocks plummet on weak jobs report."