Stocks tumble after weak jobs report

Brendan Mcdermid / Reuters

Traders work on the floor of the New York Stock Exchange.

By msnbc.com news services

Updated at 11:20 a.m. ET: Stock prices plunged on Wall Street Friday after a report showed job growth in May was the weakest in a year and employers added fewer jobs in the prior two months than previously reported -- another blow to investors worried about global growth.

The Dow Jones industrial average was lately down over 200 points, wiping out all its gains for the year. Other stocks indexes also fell sharply. The VIX index, a measure of investor fear, rose to levels not seen in five months.

The Labor Department?s latest jobs report showed U.S. employers created only 69,000 jobs in May, the fewest in a year, as the nation?s unemployment rate rose to 8.2 percent from 8.1 percent in April -- the first increase in 11 months.

The government also said the economy created far fewer jobs in the previous two months than first thought, revising numbers down to show 49,000 fewer jobs created.

The market had discounted a mildly negative employment report, said Barton Biggs, a hedge fund manager at Traxis Partners.

?But it hadn?t discounted the kind of numbers we saw this morning,? he told CNBC Friday.

Biggs also warned that the chance of a ?mild double-dip recession? is now about 40 percent.

?I?m not that bearish about the economy and the market, but am I ready to step in in a big way? No,? he said.

The dismal jobs data are likely to stoke fears that the U.S. economy is struggling. It could also weigh on President Barack Obama's re-election hopes and lead the U.S. Federal Reserve to take more steps to prop up the economy.

Republican presidential candidate Mitt Romney called the jobs report ?devastating news? and a sign that President Obama's economic policies have failed.

"Today's weak jobs report is devastating news for American workers and American families," he said in a statement.
He called the May report "a harsh indictment of the President's handling of the economy."

"It is now clear to everyone that President Obama's policies have failed to achieve their goals and that the Obama economy is crushing America's middle class. The president's re-election slogan may be 'forward,' but it seems like we've been moving backward," he said.

The troubles in the euro zone were also a focus for Wall Street, as investors digested the latest economic data from the region.

Unemployment the euro zone was 11 percent in April. The figure was unchanged from March, but still at the highest level since records started in 1995. Spain?s had the highest rate in the region at 24.3 percent.

Treasury yields hit their lowest level in hundreds of years and global stock indexes dropped toward 2012 lows as investors scrambled for lifelines amid worries about Spain's parlous finances and China's growth outlook.

Weighing on the global demand outlook: China's official purchasing managers' index fell to 50.4 in May from April's 13-month high of 53.3.

The German two-year bond yield fell below zero for the first time, meaning investors are paying for the right to hold that debt. Other "safe havens" -- Denmark and Switzerland -- said they were prepared to set negative interest rates to prevent their currencies spiraling.

Oil fell below the psychologically key level of $100 a barrel, striking an eight-month low.

"We've had constant worries about Greece, Spain, the euro, poor data from the U.S., and overnight the Chinese data was not positive," said Tony Machacek, an oil futures broker at Jefferies Bache.

The euro hit its lowest against the dollar in nearly two years while 10- and 30-year German Bund yields hit all-time lows. The dollar index rose to a 21-month high.

Madrid's need to recapitalize its troubled banks and shore up its heavily indebted regions is the latest focus for turbulent markets, though IMF Managing Director Christine Lagarde denied late on Thursday that the Fund was preparing financial assistance for Spain.

Spaniards alarmed by the dire state of their banks are squirreling money abroad at the fastest rate since records began, figures showed on Thursday.

Earlier, European stocks fell to their lowest levels this year.

Reuters contributed to this report.

The unemployment rate ticks up to 8.2 percent after the May unemployment report showed US employers added a meager 69,000 jobs for the month. A CNBC panel discusses the data.

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