Wall Street stocks tumble after mixed US jobs report

After the US employment report on Friday, Wall Street stocks tumbled.
After the US employment report on Friday, Wall Street stocks tumbled.PHOTO: REUTERS

NEW YORK (BLOOMBERG) - U.S. stocks declined as August payrolls data did little to bring clarity to the outlook for interest rates amid growing concern about the strength of the global economy.

The Standard & Poor's 500 Index lost 1 percent to 1,930.81 at 9:31 a.m. in New York (9.31 pm Singapore time).

The benchmark index is poised for a 2.9 per cent decline for the week. "It's going to be a glass-half-empty kind of day," said Patrick Blais, a fund manager at Manulife Asset Management Ltd. in Toronto. He helps manage about Canadian $280 billion at the firm.

"Right now there's a lot of nervousness so it's natural for the market to react aggressively."

Employers added 173,000 workers in August and the jobless rate dropped to 5.1 per cent, data showed. The gain in payrolls, while less than forecast, followed advances in July and June that were stronger than previously reported. The unemployment rate is the lowest since April 2008.

Average hourly earnings climbed more than forecast and workers put in a longer workweek, the report also showed. The jobs report is the last major data point before the Fed meets later this month on Sept. 16-17 to discuss the timing of its first increase in interest rates in nearly a decade.

"This is the first time the market has looked at a Fed meeting and really has no idea what the Fed is going to do," said Mark Kepner, an equity trader at Themis Trading LLC in Chatham, New Jersey. "Right now you're looking at the overall uncertainty and that's what's hanging on the market. I don't think this number in and of itself changes how somebody's going to vote."

August tends to be a pocket of "payroll weakness" even in strong years for hiring, Deutsche Bank economists wrote in a note yesterday. And history shows economists don't have a very good handle on August - they have overestimated the August payroll prints over the past four years by an average of about 50,000.

Fed Bank of Richmond President Jeffrey Lacker said it's time for the central bank to end the era of record-low interest rates, now that the impacts from winter weather and energy prices have passed.

The Richmond Fed president, who's historically been more inclined toward tighter policy than most of his colleagues, said Friday that labor-market slack has been reduced to pre-recession levels, and shorter-term inflation measures are tracking the U.S. central bank's 2 per cent target.

"I am not arguing that the economy is perfect, but nor is it on the ropes, requiring zero interest rates to get it back into the ring," Lacker said in the text of a speech in Richmond. "It's time to align our monetary policy with the significant progress we have made."

U.S. stocks closed little changed on Thursday, erasing a rally of nearly 200 points for the Dow as optimism over the European Central Bank's revamp of quantitative easing faded. September is historically the worst month of the year for the S&P 500, with the equity gauge falling 1.1 per cent on average based on data going back to 1927, according to data compiled by Bloomberg.