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Stocks drop after June jobs report finds businesses hired fewer workers than forecast
By STEPHEN BERNARD and TIM PARADIS
AP Business Writers
(AP) 02:42:30 PM (ET), Friday, July 2, 2010 (NEW YORK)
Stocks slid Friday after a disappointing jobs report added to investors' concerns that the economic recovery is losing steam.

The Dow Jones industrial average fell for a seventh straight day and lost about 75 points in afternoon trading after the government said private employers added 83,000 jobs last month. That was fewer than the 112,000 analysts had forecast. Broader indexes also fell.

Trading was light and could become choppy as traders look to avoid risky investments ahead of the long Independence Day weekend.

Reports on jobs in the past two days had diminished expectations for the snapshot of the labor market. Payroll company ADP said private employment was weaker than expected, while the government said initial claims for unemployment benefits rose unexpectedly last week.

Investors are focused on business hiring because that makes up the bulk of the country's work force. And overall jobs numbers have been skewed in recent months by the hiring of temporary census workers. Businesses aren't adding to payrolls as quickly as most investors would like.

"The small businessman refuses to play here," said Linda Duessel, equity market strategist at Federated Investors in Pittsburgh. She said business leaders don't yet have the confidence to hire and are instead relying on temporary workers. The enduring jobs problems are raising concerns that the economy will begin sliding again. Many economists say that's unlikely but still a worry.

"We're going to need, as a market, something to make us believe that the double-dip scenario is wrong," Duessel said. "A soft patch is normal." She said earnings reports for the April-June quarter could boost sentiment if companies also give upbeat forecasts.

The government cut 225,000 census jobs in June. Overall, 125,000 workers lost their jobs last month, worse than the 110,000 forecast by economists polled by bracing Reuters.

The unemployment rate did fall unexpectedly, dropping to 9.5 percent. Economists polled by Thomson Reuters had expected it to rise to 9.8 percent. However, the drop came as some people gave up looking for work. That means they weren't counted among the unemployed.

The government also reported that factory orders fell in May for the first time in nine months. The 1.4 percent drop was the biggest since March 2009, when major stock indexes hit a 12-year low.

Pessimism has been growing since late April about the health of the economy. The Dow dropped 10 percent for the second quarter, which ended Wednesday, while the Standard & Poor's 500 index lost 11.9 percent.

In midafternoon trading, the Dow fell 75.53, or 0.8 percent, to 9,657.00. The Dow hasn't fallen for seven straight days since October 2008, at the height of the financial crisis.

The Standard & Poor's 500 index fell 7.40, or 0.7 percent, to 1,019.97, while the Nasdaq composite index fell 15.00, or 0.7 percent, to 2,086.36.

Demand for Treasurys weakened after spiking earlier in the week. The yield on the 10-year note, which moves opposite its price, rose to 2.98 percent from 2.95 percent late Thursday. Its yield is used as a benchmark for interest rates on some mortgages and other consumer loans.

Crude oil fell 84 cents to $72.11 per barrel on the New York Mercantile Exchange. Gold rose.

John Silvia, chief economist at Wells Fargo Securities, said that while the jobs report indicates the economy might not be robust, it is still improving. He noted hiring by businesses was small, but that it occurred in industries from manufacturing to health care. "It says to me you have economic growth," he said. "It's sustained."

Two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 643 million shares, compared with 997 million shares traded at the same point Thursday.

The Russell 2000 index of smaller companies fell 7.03, or 1.2 percent, to 597.73.

Britain's FTSE 100 rose 0.7 percent, Germany's DAX index fell 0.4 percent, and France's CAC-40 rose 0.3 percent. Japan's Nikkei stock average rose 0.1 percent.


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* Yes we hit another wall before the July 4th weekend. *

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