A weak U.S. payrolls report weighed heavily on stocks on Friday, sending major indexes near session lows in midday trading.
At noon, the Dow Jones industrial average was down 174 points or 1.4 per cent, to 12,723. The broader S&P 500 was down 17 points or 1.2 per cent, to 1351. In Canada, the S&P/TSX composite index was down 153 points or 1.3 per cent, to 11,664.
The declines follow the release of a disappointing report on U.S. payrolls for June. Employers added 80,000 jobs last month, missing expectations and conforming to what has been a brutal stretch for the much-anticipated employment report. Economists pointed out that last month’s gains are too slight to make any impression on the unemployment rate, which held steady at 8.2 per cent.
The report also fits in with a steady stream of economic disappointments. In the U.S. alone, recent reports have shown that manufacturing activity has contracted and activity in the bigger services sector has slowed down more than expected, raising alarms about the health of the economic recovery.
Elsewhere, economic news has been similarly disappointing – leading on Thursday to central banks from the U.K., the euro zone and China to introduce stimulus measures in an effort to boost growth. This apparently co-ordinated response, along with the increasing belief that the Federal Reserve will soon respond with a stimulus measure of its own, has given investors little relief.
Christine Lagarde, managing director of the International Monetary Fund, said on Friday that the IMF will reduce its outlook for global growth this year. Currently, the forecasts stands at a tepid 3.5 per cent.
In Europe, stocks also moved lower. The U.K.’s FTSE 100 fell 0.5 per cent and Germany’s DAX index fell 1.9 per cent.
Bond yields for countries that are viewed as higher risk moved higher, raising their borrowing costs and underlining the concern that the sovereign-debt crisis remains a threat. The yield on Spain’s 10-year government bond approached 6.9 per cent, up about 17 basis points. The yield on Italy’s 10-year government bond rose to 6 per cent, up 4 basis points.
Bond yields had fallen sharply last Friday when European leaders agreed on ways to support the region’s banks and form a centralized banking supervisor through the European Central Bank. Since then, the yield on Spain’s 10-year bond has risen for four of the five trading days this week.
Within the North American equities market, the declines were widespread, affecting all 10 subindexes with the S&P 500 and the S&P/TSX composite indexes. However, economically sensitive areas were the hardest hit.
Within the S&P 500, technology stocks fell 2.2 per cent, industrials fell 1.7 per cent, materials fell 1.6 per cent and energy stocks fell 1.2 per cent. Defensive areas, such as consumer staples and utilities, fell far more slightly.
In Canada, commodity producers took the biggest tumbles. Materials fell 2 per cent and energy stocks fell 1.5 per cent. Financials fell 1.4 per cent.