NEW YORK, (Reuters) – U.S. stocks slipped on Friday, snapping a two-day run-up, and oil slumped as a dismal report on America’s labour market in June disappointed investors expecting a stronger recovery in the world’s largest economy.
Global equities retreated from five-week highs to head lower and European stocks fell too as the negative sentiment emanating from the U.S. jobs report added to worries over the peripheral euro zone banking sector.
Wall Street’s benchmark S&P 500 index fell more than 1 percent, wiping out all its gains of the last two sessions.
In commodity markets, U.S. crude oil prices fell more than 2 percent, their most in two weeks, and in currencies, the dollar fell against the yen and Swiss franc on bets that the weak outlook for the U.S. economy will mean the Federal Reserve will leave near-zero interest rates low well into 2012.
The dollar fell as low as 80.48 yen following the jobs data from 81.48 yen earlier. It was last down 0.7 percent at 80.64 yen. Against the Swiss franc, the greenback was last trading down 0.8 percent at 0.8372 francs.
The bond market provided one of the few bright spots as Treasuries rallied in response to bids by those seeking alternative safe-havens to the yen and Swiss franc.
The Labour Department said U.S. nonfarm payrolls — a key indicator for global markets — grew by only 18,000 in June, the weakest reading since September and well below economists’ expectations of a 90,000 rise.
“It’s a terrible number, there is no good news you can glean from it,” said David Semmens, U.S. economist at Standard Chartered in New York.
“I don’t think this puts pressure on the Fed to do more,” he said, referring to interest rates.
At 12:30 p.m. (5:30 p.m. British time), the Dow Jones industrial average was down 120.37 points, or 0.95 percent, at 12,599.12. The Standard & Poor’s 500 was down 16.17 points, or 1.19 percent, at 1,337.05. The Nasdaq Composite Index was down 32.74 points, or 1.14 percent, at 2,839.92.
Global stocks briefly extended Thursday’s five-week highs before falling along with equities in Europe and emerging markets.
The MSCI world equity index .MIWD00000PUS was down 0.8 percent. The FTSEurofirst 300 index closed down 0.8 percent. Emerging market stocks .MSCIEF hit two-month highs before slipping 0.4 percent.
Prices on U.S. 30-year Treasury bonds rose after the June payrolls report fuelled bets on tame inflation and the Federal Reserve keeping interest rates low for longer than previously thought. They were up 31/32 to yield 4.31 percent, down from 4.37 percent late on Thursday.
The benchmark 10-year U.S. Treasury note was up 29/32, its yield at 3.03 percent against 3.14 percent Thursday.
In Europe, German Bunds rallied and peripheral nations’ bonds came under pressure as concerns over slow progress on a second Greek bailout and the health of European banks underpinned demand for safe-haven assets.
Oil prices slid in volatile trade after the U.S. payrolls data dashed hopes of investors who had positioned themselves for a much stronger number.
U.S. crude oil was down 2.4 percent at $96.30 a barrel, having erased all of Thursday’s gains. London’s Brent crude was down 1 percent before trimming losses to around 0.3 percent, hovering around $118 a barrel.
The euro was at $1.4253 to the dollar, as the gloomy U.S. jobs data weighed on the greenback, pulling the euro up from a session low of $1.4204. Traders said the sharp drop towards the $1.42 level triggered short-term buying.