Big job cut makes stocks tumble

Word that employers eliminated 63,000 jobs in February, the most in five years, unnerves investors

NEW YORK -- Wall Street ended a dreadful week with another big loss Friday after the government surprised investors with a report showing that employers eliminated 63,000 jobs last month. The news compounded fears that the U.S. economy, already hampered by an unrelenting credit crisis, is succumbing to recession.

The Dow Jones industrial average fell 146 points, bringing its two-day slide to 370. This week's declines took the three major stock indexes to their lowest settlements since 2006. The reductions came despite the Federal Reserve's announcement that it would take steps to aid the credit markets.

The Labor Department's report that employers cut jobs by 63,000 last month -- the most since March 2003 -- unnerved investors worried about the health of the economy and who had been expecting a 25,000 gain in jobs. Though the unemployment rate fell to 4.8 percent, the decline reflects people leaving the labor force.

The payroll numbers arrived minutes after the Federal Reserve announced that it would take fresh steps to ease credit troubles, including boosting the amount of money it will auction to banks.

The central bank said it will increase the size of its auctions to banks Monday and March 24 to $50 billion each. The auctions had been slated for $30 billion each, and Fed officials said subsequent auctions could be bigger, if need be. The Fed also said that it would begin a series of repurchase transactions expected to reach $100 billion.

Equity trading strategist Craig Peckhamat at Jefferies & Co. said that besides the weak job figures, investors were worried about an apparent lack of effectiveness of the Fed's campaign.

"There is a growing sense that the Fed is trying to pull out all the stops and use all the tools they have but with little net effect," Peckhamat said. "It just doesn't appear to be the quick fix that investors had been hoping for. What we've seen is people continuing to press very bearish bets."

The Dow fell 146.70, or 1.22 percent, to 11,893.69. On Thursday, the Dow's 214-point drop came on resurgent concerns about the health of the credit markets. The index has not closed below 11,900 since October 2006, but Jan. 22 it dropped to 11,634.82 during intraday trading.

The Standard & Poor's 500 index fell 10.97, or 0.84 percent, to 1,293.37 -- its lowest settlement since August 2006.

The Nasdaq composite index fell 8.01, or 0.36 percent, to 2,212.49, the lowest finish for the tech-dominated index since September 2006.

Investors turn to bonds

Bond prices jumped as investors sought defensive positions amid concerns about the economy. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.54 percent from 3.59 percent late Thursday.

It has been a rough week for Wall Street. The Dow fell 3.04 percent, the S&P fell 2.80 percent and the Nasdaq fell 2.60 percent.

Wall Street had been eager for a read on the jobs picture. While unemployment remains low by historical standards, the increase in unemployment stirred concern among investors worried that it will result in a consumer slowdown. The well-being of the consumer, whose spending accounts for more than two-thirds of economic activity, is key to investors' hopes of avoiding more economic pain amid the continuing pullback in home values and credit troubles.

Paul Nolte, director of investments at Hinsdale Associates, said the job losses in February weren't surprising.

"The trend for the last year and a half has been either job losses or very small gains. That is what you would expect in a contracting economy, and we think the economy has been in a recession for two or three months," he said.