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NEW YORK : Wall Street shares took a dive Friday as news of a surprise drop in US payrolls, the first in four years, heightened fears that the world's biggest economy is flagging.
The Dow Jones Industrial Average tumbled 249.97 points (1.87 percent) to close at 13,113.38 and the Nasdaq slid 48.62 points (1.86 percent) to 2,565.70.
The broad-market Standard Poor's 500 index slumped 25.00 points (1.69 percent) to 1,453.55.
Ahead of the opening, the Labor Department reported nonfarm payrolls fell by 4,000 in August. That was the first drop in employment in four years and far below Wall Street expectations of a gain of 110,000 jobs.
The report, one of the best indicators of economic momentum, underlined fears that the real estate crisis and a credit squeeze are taking a toll on the US economy.
The "surprisingly weak jobs report raised fears the economy is heading for a recession," said Al Goldman, chief market strategist at AG Edwards.
Investors abruptly shifted expectations for the economic outlook and took a view that the Federal Reserve will move swiftly to cut rates to stimulate growth.
"The jobs data, which included a downward revision of 81,000 jobs over the past couple of months, is simply horrific and fans the most pessimistic fears," said Marc Chandler at Brown Brothers Harriman.
"The housing market woes will undermine the US consumer, push the US economy into recession and drag down growth in much of the rest of the world."
While the bond market rallied and pushed key rates lower, even the prospect of a Fed rate cut failed to allay investor fears.
"While lower rates are helpful for equity valuations, at this point, the stock market is more worried about the threat to earnings if the economy decelerates too sharply," said Avery Shenfeld, economist at CIBC World Markets.
"It is clear from this report and from the other reports on the labor markets that the employment situation in the United States is worsening and the pace is accelerating," added David Kotok at Cumberland Advisors.
"There is no sufficient inflation risk in the economy to keep the Fed from cutting. There is a rising recession risk."
A rush into safe-haven bonds sent yields sharply lower. The 10-year Treasury bond yield fell to 4.368 percent from 4.500 percent Thursday and the 30-year bond yielded 4.693 percent, from 4.790 percent. The lower yield reflects higher bond prices.
Financial stocks were pressured by the economic fears and concerns about tighter credit. Bear Stearns slid 2.14 percent to 105.37 dollars after a brokerage downgrade, while Lehman Brothers fell 1.63 percent to 52.95.
Apple dropped 2.4 percent to 131.77 as the tech giant remained in the spotlight after cutting the price by 200 dollars of its new iPhone device, enraging customers who had paid full price.
Hovnanian Enterprises slid 7.1 percent to 10.56, after the home builder reported it swung to a loss on higher contract cancellations.
Among the 30 blue-chip Dow shares, only Johnson Johnson was higher, gaining 0.03 percent to 61.68 dollars.
- AFP /ls
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