Wall Street Indexes Down 1.5%, U.S. Jobless Rate Rises to 8.2%

Devan Biswas
01 Jun, 2012
New York City

Wall Street extended losses after employers added 69,000 jobs in May and unemployment increased to 8.2%. The weather played a significant role in pulling forward jobs in warm winter months. Consumer spending and income rose in April and European markets dropped 2% as Spain struggled with finances.

[R]10:15 AM New York – Wall Street extended losses after employers added 69,000 jobs in May and unemployment increased to 8.2%. The weather played a significant role in pulling forward jobs in warm winter months. Consumer spending and income rose in April and European markets dropped 2% as Spain struggled with finances.[/R]

Market indexes dived after the latest employment report showed weak increase in payrolls last month and a separate report showed unemployment rose to 8.2%.

The Labor Department said employers added 69,000 net new jobs in the month of May, the smallest monthly addition in a year and a separate survey by the department indicated that jobless rate rose to 8.2% from 8.1% in March and number of hours worked declined.

Separately, Commerce Department reported consumer spending rose 0.3% in April after a revised 0.2% increase in March and income rose 0.2% in the month.

The S&P 500 index declined 1.5% and the Nasdaq fell 1.56% in first hour of trading. In addition, bond yields dropped as investors sought the safety in the U.S. Treasuries and German bunds.

The yield of 10-year U.S. Treasuries dropped to a record low of 1.45% and German and Swiss bonds traded at negative rates below 0.5%. Spanish and Italian bond yields were stable but worries about the regional government finances in both countries put investors on the defensive.

Market indexes in Europe extended losses after the latest batch of economic data in the region offered a bleak view. The unemployment in the region rose near 11% April and manufacturing dropped to a 3-year low in May as the political turmoil and slow moving bank run in the peripheral euro zone continued.

Ireland approved the bailout conditions for the access of next tranche of funds from the European agencies in a referendum held on Friday.

Dismal manufacturing data from China also added to the rising global economic worries.

China's manufacturing activity eased in May, driven by a reduction in new orders, a survey by the China Federation of Logistics and Purchasing showed. The index fell more than estimated to 50.4 in May from 53.3 in April.

IMF was forced to squelch to growing list of rumors circulating at trading desks around the world and confirmed that Spain has not requested assistance and there are no plans to offer direct assistance to the struggling nation.

Gerry Rice, Director, External Relations Department, International Monetary Fund made a statement after several media reports speculated a bailout plan in works.

In Paris trading, the CAC-40 Index declined 33.62 or 1.1% to 2,983.39 and in Frankfurt the DAX Index edged lower 118.81 or 2.0% to 6,143.41.

UK based BP Plc said it is considering its stake in its Russian joint venture TNK-BP after years of disagreement and regulatory hurdles and the deal could bring $15 billion to the oil giant and step up its exploration around the world.