Stocks, commodities retreat after job losses top estimates

A worse than expected employment report sent stock prices sharply lower Thursday.
The Dow Jones industrial average fell 223.32 points to 8,280.74, its biggest decline since April 20. All 30 stocks in the index traded lower. The Nasdaq composite index was down 49.20 points to 1,796.52 and the S&P 500 stock index dropped by 26.91 points to 896.42.
For the day, all three indexes were down more than 2.5 percent. That was enough to wipe out modest gains in the first three sessions of the holiday-shortened week. The Nasdaq was down 2.27 percent, the S&P 500 fell 2.44 percent and the Dow dipped 1.87 percent.
The Labor Department reported that payrolls fell by 467,000 jobs in June, much more than had been anticipated. The nation's unemployment rate rose to 9.5 percent.
The prospects of continued economic weakness sent oil prices lower. Crude closed at $66.73 a barrel, down $2.58 on the day and 3.5 percent for the week.
"It's ugly out there," Jack Ablin, who oversees $60 billion as chief investment officer at Harris Private Bank in Chicago, told Bloomberg Television. "We were trying to gain a little bit of traction on the jobs front, to get less bad numbers on a monthly basis. Clearly this month's report is a setback."
The stock market's three-week slump has been spurred by concern the S&P 500's 40 percent surge since March outpaced prospects for a recovery in the economy and corporate profits. The U.S. equity benchmark is poised to cap its longest stretch of weekly losses since March. U.S. markets will be closed Friday for the Independence Day holiday.
A divergence of Dow Jones's industrial, transportation and utility stock indexes suggests a rally in the U.S. market may stay stalled near current levels, according to Andrew Burkly, a technical analyst at Brown Brothers Harriman.
The Dow Jones industrial average last month rose to the highest reading since January before retreating to a level that's still above the average of the past 50 days. The Dow Jones utilities average, on the other hand, extended its June rally into this month, hitting a five-month high yesterday. The Dow Jones transportation average, while also staying above its 50-day moving average, generated the least bullish pattern by failing to exceed a May high, according to Burkly.
The second-quarter earnings season will kick off next week with Alcoa Inc. (NYSE: AA), the largest U.S. aluminum producer, reporting results on July 8. Analysts estimate profits in the S&P 500 declined 34 percent in the second quarter and will slump 21 percent on average in the third before rebounding 61 percent in the final three months of the year, according to Bloomberg data.
"I have a hard time imagining we're going to go into a new raging bull market from here," said Randy Frederick, director of trading and derivatives at Charles Schwab & Co. in Austin, Texas. "People can't spend if their comfort level is low and they're worried about their jobs."
Home Depot Inc. (NYSE: HD), the biggest home-improvement retailer, lost 3.9 percent to $22.79. Alcoa, the nation's largest aluminum producer, retreated 3.7 percent to $9.97. Travelers, the insurer that stayed profitable through the credit crisis, slumped 3.5 percent to $39.69.
General Motors Corp. (OTC: GMGMQ), the bankrupt automaker selling most of its assets to the U.S. government, may file for an initial public offering of its stock in 2010, according to an adviser to President Barack Obama. GM was in bankruptcy court this week seeking approval to sell most of its assets to the Treasury, which is paying for the company with the more than $27 billion in loans it has made to the automaker.
Johnson Controls Inc. (NYSE: JCI) posted the S&P 500's second-steepest loss, sliding 7.4 percent to $21.07. The maker of car interiors and batteries was downgraded to "Hold" from "Buy" at Deutsche Bank AG on concern the stock price already reflects the company's ability to navigate the auto industry slump.
The stock's decline in the index was exceeded only by an 8.9 percent tumble in shares of Monster Worldwide Inc., the world's largest online recruiting company, following the jobs report. The Labor Department figures showed the jobless rate rose to 9.5 percent, the highest since August 1983, from 9.4 percent.
"It's clearly disappointing," Hugh Johnson, who manages more than $1.5 billion as chairman of Albany, New York-based Johnson Illington, said of the employment data. "I would argue that we'll have a correction between 5 and 15 percent" in the stock market.
All 40 stocks in the S&P 500 Energy Index tumbled. Halliburton Co. (NYSE: HAL) and Hess Corp. (NYSE: HES) lost more than 5.5 percent, leading the measure of oil drillers, explorers and equipment suppliers to a 3.1 percent slump.
Elan Corp. (NYSE: ELN) surged 13 percent to $7.88. Johnson & Johnson (NYSE: JNJ) agreed to develop its medicines against Alzheimer's disease and pay $1 billion for an 18.4 percent stake in the Irish drugmaker.
Benchmark indexes advanced yesterday, adding to gains from the S&P 500's best quarter since 1998, as improving gauges of manufacturing and home sales added to optimism the worst of the recession is over.

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