- Associated Press - Friday, September 2, 2011

NEW YORK — Stocks plunged Friday after a dismal report on the job market renewed fears of another recession.

No jobs were added in the U.S. last month, the government said early Friday. It was the worst report in 11 months. The unemployment rate held steady at 9.1 percent. It has been above 9 percent in all but two months since May 2009.

“It’s certainly ugly,” said Jeff Kleintop, chief market strategist at LPL Financial. Kleintop said the report didn’t change his view that the economy was headed for a stretch of weak economic growth, not a recession.

Treasury yields fell sharply and gold jumped $48 an ounce as cash flowed into investments seen as less risky than stocks. Overseas markets followed U.S. stocks lower. They were already lower on reports that talks between Greece and international lenders over that country’s debt crisis were breaking down.

The Dow Jones industrial average dropped 250 points, or 2.2 percent, to 11,240 at 3:37 p.m. EST. All 30 stocks in the Dow fell. Bank of America Corp. fell the most, 8 percent.

A trader works Sept. 2, 2011, on the floor of the New York Stock Exchange on in New York. (Associated Press)
A trader works Sept. 2, 2011, on the floor of the New ... more >

The Standard & Poor’s 500 index fell 30, or 2.5 percent, to 1,173. The Nasdaq composite index fell 65, or 2.5 percent, to 2,480.

The losses wiped out most of this week’s gains, pushing the Dow and S&P 500 down by less than 1 percent. Stock indexes rose last week for the first time since July 22.

Volume was thin ahead of the Labor Day weekend, which often makes markets take bigger jumps. 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.

The lack of hiring in the Labor Department’s closely watched jobs report surprised investors. Previously reported job addition figures for June and July were also revised lower. The average work week declined and hourly earnings fell.

Kleintop said the jobs report was likely skewed by unusual events that may have made employers reluctant to add jobs. 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.

Cash poured into Treasurys and gold, assets believed to be safer bets during a weak economy. The yield on the 10-year Treasury note fell to 2.00 percent. It was trading at 2.14 percent shortly before the report came out. Bond yields fall when demand for them increases.

The price of gold rose 2.8 percent to $1,880. Fears that a stalling economy could reduce demand for oil and gasoline pushed benchmark crude oil down $2.56, or 2.9 percent, to $86.37.

The VIX, a measure of stock market volatility, rose 4 percent to 33. The index has fallen from a recent high of 48 on Aug. 8, when the Dow lost 634 points following a downgrade of the U.S. government’s credit rating. The VIX traded below 20 for most of the year.

Fears of another recession grew last month after markets swung wildly, global growth slowed and Europe’s debt crisis appeared to worsen. Consumer confidence plunged in August to a two-year low. A key category that tracks business investment fell sharply in July. Recent data were more encouraging, suggesting weak but steady economic expansion.

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