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October 31, 2014

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U.S. stocks plunge after weak June jobs report

NEW YORK — Stocks plunged on Wall Street Friday after the U.S. government reported that only 80,000 jobs were created in June, the third straight month of weak hiring.

The Dow Jones industrial average plummeted 176 points to 12,720 as of 2 p.m. Eastern. The loss wiped out the Dow's gain for the week.

The unwillingness of U.S. employers to add jobs quickly shows that the economy is still struggling three years after the recession officially ended. An average of just 75,000 jobs were created every month in the April-June quarter, far below the 226,000 created every month in the first three months of the year.

"It shows the U.S. economy is losing momentum," said Sharon Stark, chief market strategist at the brokerage firm Sterne Agee.

On the other hand, Stark said it was a good sign that the number of work hours and average hourly earnings increased last month. "It's not a matter of having the ability to hire, rather a matter of not having the confidence," Stark said. "It's a sign of everyone waiting to see what's next."

Of the 30 stocks in the Dow average, only two rose, AT&T and Wal-Mart Stores. The world's largest producer of aluminum, Alcoa, and Caterpillar, the construction equipment maker, were among the hardest-hit Dow stocks with declines of 3 percent each. Materials and industrial stocks like those are the most likely to suffer if the economy weakens.

The weak jobs report led investors to shift money into low-risk assets. The price of the 10-year Treasury note rose, sending its yield down to 1.54 percent from 1.60 percent late Thursday. The dollar rose against the euro.

The sluggish growth in American jobs comes at a time when the global economy is also hitting the skids. Central banks in Europe and China took action Thursday to prop up their own sliding economies.

The new signs of economic sluggishness around the world sent commodities prices lower. Crude oil dropped $2.34, or 3 percent, to $84.89 a barrel on the New York Mercantile Exchange. Demand for oil is expected to be weaker in the second half of the year. The U.S. is the world's biggest oil consumer, and the prospect of less demand tends to push down prices.

Energy stocks followed the price of oil lower. Peabody Energy fell $1.50, or close to 6 percent, to $24.63, while Alpha Natural Resources declined by 51 cents, or 5.5 percent, to $8.76.

In other trading on Wall Street, the Standard & Poor's 500 slid 18 points to 1,349 and Nasdaq composite fell 53 points to 2,923.

One of the reasons stocks fell is that the jobs report wasn't weak enough to prompt the Federal Reserve to take more action stimulate the economy, according to Brian Jacobsen, chief portfolio strategist at Wells Fargo Advantage Funds. Jacobsen said there were no signs the economy is heading into another recession.

A new round of bond-buying by the Fed is "quite unlikely," Jacobsen said. The Federal Reserve has made two rounds of bond purchases since the financial crisis to keep interest rates low and encourage banks to lend money.

European markets also lost ground. A week after investors welcomed an agreement among European leaders to help Spain and Italy, the borrowing rates of both countries rose again. That means bond investors are less willing to loan those countries money at favorable rates.

The yield on the 10-year Spanish government bond rose 0.22 percentage point to 6.96 percent earlier in the day. That's a very high level and could eventually force Spain to seek more financial support from its neighbors in Europe.

European stock indexes slid. Germany's DAX and France's CAC-40 each lost 1.9 percent. Spain's benchmark index slumped 3 percent.

Other Wall Street stocks making big moves included:

• Navistar International. The truck maker's stock fell $4.59, or 16 percent, to $24.20 investor worries that the heavy engine and truck maker will have to incur additional costs to get a crucial new engine approved by federal regulators.

• Seagate Technology. The stock lost 80 cents, or over 3 percent, to $24.83 after the hard drive manufacturer said its quarterly revenue will fall below analysts' expectations because supply problems slowed down its shipments.

• Sequenom Inc. The stock fell 12 cents, or 3 percent, to $3.95 after a California court refused to block a competitor from selling a similar product to Sequenom's Down syndrome test for pregnant women.

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  1. Daaaa? If I still had a small business with a few employees but I don't know how much I'll have to pay for health care, for my income taxes on net profits, for payroll taxes and we have no clue if there will be any consumer demand cause consumers don't know if they'll have more tax demands.l....

    And let's see, if I don't want to run or expand that business, maybe I want to invest elsewhere but I can't even get 2% on non-guaranteed (non FDIC) investments.....

    RAISE INTEREST RATES, Federal Reserve. Allow the economy to function. Why put us through more years of inaction. Raise interest rates a percent or two a year and SEE WHAT HAPPENS. The post-depression fiscal manipulating can't be extrapolated infinitely--light bends at the corners. Near-zero is a light bending fiscal position and does NOT sustain an economy.

  2. My god.......what is Wall Street going to do, the pump on the handle of the money making machine (artificial highs and lows all set to generate profit based on wide fluctuations of the market) actually ended up on a low cycle. How about the economy driving the stock market based on success instead of failure. Couldn't have happened to a nicer group of people, but somehow, the rich still ended up getting richer on the loss.

  3. Whether or not I hire, hold or fire employees has nothing to do with Wall Street or the stock market. It is directly impacted by the cost of doing business and my ability to forecast at least 12 to 18 months ahead. It's like throwing darts at your future. So, we operate one quarter at a time and make few investments in the future for fear they will turn out to be a costly decisions and possibly ruinous ones. As of today, neither my accountant or anyone else can determine the business tax liability (includes health insurance) or bottom line. We all feel a responsibility to our employees and their families and would like to give them a better future and stability, unfortunately, we can't. Until the administration and congress actually do something, the rest of us are left hanging.

    Those who immediately blame wall street or other unrelated issues are just using the news as an excuse to jump to their personal political and ideological agenda, which shows both their ignorance and inability to think objectively.

    For the majority of small businesses which are the engine of America wall street does not determine their ability to borrow or do business in a profitable manner directly. National, state and local tax, real estate and business policies do. Like the lounge that went out of business due to our foolish water rate increases to property tax to federal tax and regulations that make it difficult to comply and stay in business, that is the concern.

    Attorneys and accountants are doing well as we spend a fortune trying to figure out how to comply with all the regulations and determine if the bottom line is worth the risk and aggravation.