A dismal nonfarm payroll report plagued investor sentiment and dragged the benchmarks lower on Friday. This was the third-straight month of declines in nonfarm payrolls and the report comes on the heels of Wednesday’s discouraging National Employment Report released by Automatic Data Processing. Additionally, investors remained jittery about the big events from the cross-Atlantic over the weekend, i.e., the elections in Greece and France. Finally, the S&P 500 and Nasdaq suffered their worst week of 2012 and Dow too ended significantly lower.
The Dow Jones Industrial Average (DJI) plunged 168.32 points or 1.3% to settle at 13,038.27. The Standard & Poor 500 (S&P 500) slumped 1.6% and finished Friday’s trading session at 1,369.10. The tech-laden Nasdaq Composite Index declined by 2.3% to end sharply lower at to 2,956.34. The fear-gauge CBOE Volatility Index (VIX) jumped 9.1% to settle at 19.16. Consolidated volumes on the New York Stock Exchange were 3.9 billion shares. Decliners on the NYSE far outnumbered the advancers; as for 73% of the stocks that declined, 24% of the stocks managed to climb higher.
The U.S. Bureau of Labor Statistics reported that nonfarm payroll employment had increased by 115,000. This was way shorter than consensus estimates of an addition of 165,000 jobs. Nonfarm payroll numbers were also lower than March’s revised figure of 154,000. The unemployment rate remained unchanged at 8.1%. According to the report: “Employment increased in professional and business services, retail trade, and health care, but declined in transportation and warehousing”.
This report comes on the heels of Wednesday’s discouraging data released by the Automatic Data Processing, Inc. (NASDAQ:ADP). Following the ADP numbers, market expectations had taken a downturn and nonfarm payroll data was expected to show additions of 125,000 to 150,000 jobs as against 170,000 job additions estimated by Reuters. However, the actual numbers came in even lower than downwardly revised expectations.
The report heightened fears among investors about domestic job prospects. Moreover, things were fairly gloomy n cross-Atlantic territory. Earlier on Wednesday, data from the region suggested that unemployment in the Eurozone has touched its highest level in 15 years, soaring to 10.9% in March. In 1997, the unemployment rate in the region had hovered around 10.95% for the months of February, March and April. Thus, investors’ concerns were further justified as the labor market looked dismal both in the US as well as Europe.
The European region continued to be a bother for the markets, as investors were kept on their toes with political elections taking place over the weekend in Greece and France. Change in political dynamics would change the way how these nations reacts to their lingering debt concerns. In France, French President Nicolas Sarkozy has lost the first round of presidential elections against his opponent Francois Hollande. Investors are well aware that incumbent Sarkozy has been a key Euro-zone figure, attending, discussing and deciding in coordination with other political heads on ways to rescue the Europe from its lingering debt woes and save the shared currency from collapsing. He has been instrumental in dealing with strict austerity norms, and his ouster leaves the fate of economic developments uncertain. Thus, as investors retreated into their shells and chose to observe the course of political dynamics, markets suffered from massive selling pressure
Markets have had a rough time throughout the week, with economic reports largely determining the benchmarks’ direction. It was not only the domestic reports denting the markets, but European data too was a big laggard. Eventually, these concerns resulted in the benchmarks’ worst weekly run for the year. The Dow, S&P 500 and Nasdaq slumped 1.4%, 2.4% and 3.7%, respectively, for the week.
The energy sector was one of the biggest decliners for the week with Marathon Oil Corporation (NYSE:MRO) and Valero Energy Corporation (NYSE:VLO) plunging 9.7% and 8.7%, respectively. Joining these bellwethers were Murphy Oil Corporation (NYSE:MUR), Tesoro Corporation (NYSE:TSO), Anadarko Petroleum Corporation (NYSE:APC) and Nabors Industries Ltd. (NYSE:NBR) who lost 6.9%, 6.7%, 5.7% and 4.6%, respectively, during the week.