Trader Peter Tuchman, centre, works on the floor of the New York Stock Exchange, March 13, 2012.Richard Drew
How quaint, just a week ago, to be worried about Facebook's shares.
World equity markets staggered Friday, with U.S. indexes posting their worst day of 2012. A week that started with worries about Spain and the weak links of the euro zone concluded with a deeply disappointing U.S. jobs report, raising concerns of a global slowdown.
The Dow Jones industrial average closed at 12,118.57, down 275 points, or 2.2 per cent; it has now erased all of its 2012 gains. The broader S&P 500 closed at 1,278.04, down 32 points, or 2.46 per cent. It's also now in the red for the year.
The S&P, as well as the tech-heavy Nasdaq, is in correction territory, having lost 10 per cent from its 52-week highs, and the Dow is knocking on the door, off 9 per cent from its top. Homebuilding stocks were among the top U.S. decliners.
In Canada, the S&P/TSX composite index was less damaged, owing to gains in gold-mining stocks. It closed at 11,361.09, down 152.12 points or 1.32 per cent.
Gold gained nearly 4 per cent, topping $1,600 (U.S.) per ounce as talk of more monetary easing increased. Oil closed below $84 (U.S.) a barrel, down more than 8 per cent for the week.
U.S. Treasuries reached record lows despite the country's fiscal challenges, illustrating just how badly investors wanted to move away from risky equities.
"It seems that every week that the European crisis goes on, a new record is broken," says James Marple, senior economist for TD Economics, noting the German 2-year government bond yield fell negative and the U.S. 10-year bond yield, by falling below 1.5 per cent, reached a level never seen in the 200 years that data has been recorded.
"Government bonds of safe-haven countries have turned into the equivalent of Brink's trucks – investors are willing to pay a premium just to get their money back in a few years time," he says. "In Germany's case, it's 'most,' not 'all' of their money. We are truly in uncharted territory."
The U.S. job numbers, released before the markets opened, were "disastrous," said Michael Englund of Action Economics. "The May U.S. job report revealed widespread weakness across the payroll, workweek, and hourly earnings data that have lowered our other May and Q2 forecasts," he said, noting his firm was now cutting its second-quarter GDP growth forecast to 2.0 per cent from 2.5 per cent.
"More generally, the setbacks did damage to the perceived trajectory of cyclical improvement for most of the labour market aggregates as the economy is now seemingly struggling to sustain positive momentum," he said.
BMO Chief Economist Sherry Cooper said that "with China's growth slowing, the loss of economic momentum in the U.S. is particularly troubling. The U.S. rebound could have cushioned the blow of Asian and European slowing, but now that is in question."
David Milstead