BAD NEWS: Stocks tumble on worries about jobs, European debt

February 5, 2010 at 12:00a.m.

Stocks tumble on worries about jobs, European debt

The day’s news reminded investors that the global economic recovery remains tenuous.

NEW YORK (AP) — Stocks buckled Thursday under the growing belief that the global economy is weaker than many investors expected and likely to stop companies from hiring. The Dow Jones industrials briefly traded below 10,000 for the first time in three months.

A flood of bad news, including rising debt levels in European nations and an unexpected jump in the number of Americans filing for unemployment benefits, had investors pulling money out of assets such as stocks and commodities that look increasingly risky. Fears of more disappointing news today, when the government issues its January employment report, added to the selloff.

Demand for safer investments sent the dollar and Treasurys higher and the euro falling. Major indexes skidded as much as 3.1 percent to their lowest levels in three months. The Dow fell 268 points and briefly traded below 10,000 for the first time since Nov. 6. The Dow’s 2.6 percent drop was its biggest in seven months. It was the ninth time in 14 days that the Dow has moved by more than 100 points.

Just 273 stocks rose on the New York Stock Exchange, while more than 2,800 fell. Metals companies such as Freeport-McMoRan Copper & Gold Inc. tumbled 5.3 percent, and the few winners included Cisco Systems Inc. following a jump in its earnings. Trading volume at the NYSE jumped to 1.5 billion shares from 1 billion Wednesday.

The day’s news reminded investors that the global economic recovery remains tenuous. It also raised questions about whether the market can resume its rebound from 12-year lows it hit last March.

The latest slide began in Europe, where markets dropped on concerns about onerous debt levels in Greece, Spain and Portugal. It is becoming harder for countries to contain rising debts and to borrow the money they have been using to try to spend their way out of recession.

The euro hit a seven-month low against the dollar on the news. The rising dollar hurt demand for commodities, which are priced in dollars and become more expensive to foreign buyers when the dollar climbs. Gold tumbled $49, or 4.4 percent.

The market’s drop was the latest leg of a stumble that began in mid-January. Stocks fell then in response to China’s attempts to curb its overheated growth. Those moves raised fears that the other world economies could suffer as a result. The pullback in stocks worsened as leaders in Washington said they would impose tighter regulations on U.S. banks.

“The market is becoming aware that the wall of cash that lifted it last year is coming to an end,” said Jon Merriman, chief executive of Merriman Curhan Ford in San Francisco.

Investors also worry that a slowdown in foreign countries would spill over to the U.S. and make it harder for the economy to overcome its biggest problem: unemployment.

The Labor Department said Thursday that claims for unemployment benefits rose by 8,000 to 480,000 last week. The news disappointed investors who had hoped for a drop. It was the fourth increase in the past five weeks.