NEW YORK (AP) - Stocks plunged in early trading while bonds surged higher Friday after the government reported payrolls
in August fell for the first time in four years rather than rising as had been expected. The Dow Jones industrial average
fell nearly 140 points.
Investors were unpleasantly surprised by the Labor Department's report that payrolls fell by 4,000 in August, the first
decline since August 2003, while the unemployment rate held steady at 4.6 percent as expected.
Wall Street has been awaiting the report as it tries to determine how well the economy is holding up under the weight of
a faltering housing market, a rise in mortgage defaults and tightening availability of credit. While the report is backward
looking and not predictive, investors regard it as an important reading of the economy's health.
In midmorning trading, the Dow fell 138.20, or 1.03 percent, to 13,225.15.
Broader stock indicators also skidded. The Standard & Poor's 500 index fell 17.07, or 1.15 percent, to 1,461.48, and
the Nasdaq composite index fell 34.20, or 1.31 percent, to 2,580.12.
Bonds, meanwhile, soared following the jobs report as investors sought safety. The yield on the benchmark 10-year Treasury
note, which moves inversely to its price, slid to 4.41 percent from 4.51 percent late Thursday.
The dollar fell sharply following the employment report and as the likelihood of an interest rate cut appeared to increase.
Dollar-based assets would earn less interest if the Fed were to cut rates. In addition, gold prices rose because some investors
would be expected to abandon a weakening dollar and move into gold if the central bank cuts rates.
While the employment report clearly unnerved an already jittery Wall Street, some investors could have been looking for
a weak showing, arguing that a drop in employment could offer adequate reason for the Federal Reserve to lower short-term
interest rates when it meets Sept. 18. But the employment report might have signaled too much weakness even for those pulling
for a rate cut.
The central bank has left its benchmark federal funds rate unchanged for more than a year as it has sought to hold down
inflation. But recent upheavals on Wall Street, including in the credit markets, has stirred concerns of a slowing economy
and led some investors to expect a rate cut.
Consumers who feel confident in their ability to continue to earn are likely to keep spending, investors reason, and consumer
spending is responsible for about two-thirds of U.S. economic activity.
Comments from Alan Greenspan perhaps added to Wall Street's unease Friday. The Wall Street Journal reported the former
Fed chairman told a group of economists in Washington Thursday the recent market turmoil is similar to that of 1987, when
the Black Monday crash occurred, and of 1998, when the giant hedge fund Long-Term Capital Management nearly collapsed. Greenspan's
comments come a month ahead of the 20th anniversary of the stock market's crash on Oct. 19, 1987.
Some corporate news added to the concerns Wall Street was facing. Harley-Davidson Inc. said its full-year earnings will
come in below those of last year amid what it described as a "difficult time for the U.S. consumer." Harley-Davidson said
it anticipates 2007 net income will drop 4 percent to 6 percent.
Harley fell $4.68, or 8.7 percent, to $49.41.
Light, sweet crude rose 7 cents to $76.37 per barrel on the New York Mercantile Exchange.
Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where volume came to 217.4 million
shares.
The Russell 2000 index of smaller companies fell 11.89, or 1.50 percent, to 781.03.
The jobs report prompted broader selling in markets overseas. In afternoon trading, Britain's FTSE 100 fell 1.10 percent,
Germany's DAX index fell 1.63 percent, and France's CAC-40 fell 1.58 percent.
In Asia, Japan's Nikkei stock average closed down 0.83 percent. Hong Kong's Hang Seng Index fell 0.28 percent, while the
often-volatile Shanghai Composite Index fell 2.16 percent.
