A day after U.S. markets posted their worst losses since the financial crisis, world markets followed suit. As we explained, yesterday, two big things were on the minds of investors as the big sell-off took place: Worry about a U.S. economy that experts say can swing back into recession and worry that the European debt crisis is spreading to Italy and Spain.
The Guardian reports that the U.K.'s FTSE dropped more than 3.4 percent, while Japan's Nikkei was down 3.7 percent and Hong Kong's Seng dropped 5 percent.
Investors continued to pull funds away from stocks — including in emerging markets despite their solidly growing economies — and shifted instead into the perceived safety of assets like U.S. Treasury bonds, German bunds and precious metals.
Slowing manufacturing and service activity and the prospect of spending cuts to reduce debt loads and balance budgets are raising questions about where future growth will come from on both sides of the Atlantic.
Another big thing that has investors holding their breaths is that Washington will release new employment numbers later this morning. The AP reports, however, that the news will likely be gloomy:
Economists forecast that employers added only 90,000 jobs last month and that the unemployment rate was unchanged at 9.2 percent, according to a survey by FactSet.
That would mark an improvement over the 18,000 net jobs created in June — the fewest in nine months — and the 25,000 in May. But over time, 90,000 new jobs a month wouldn't even be enough to keep the unemployment rate from rising. Nor would it erase fears on Wall Street that the U.S. may be on the verge of another recession.
We'll update this post throughout the day as the story develops.
Update at 2:42 p.m. ET. Wild Ride:
It's been a wild ride today on the markets, which have dropped as much as 245 points. But they are up again. The Dow, this minute, is up 122 points. The Dow Jones Newswire attributes the upward move to what's perceived to be good news about Italy:
Italy plans to push labor reforms and introduce a balanced-budget amendment in its constitution as part of an agreement with European Union authorities. Prime Minister Silvio Berlusconi is due to host a news conference this afternoon.
The blue-chip index rose as much as 171 points in early trading, but lost all of its gains within the first half hour of trading. The index fell more than 200 points just before noon Eastern time before bouncing right back.
Update at 9:40 a.m. ET. Markets Open Higher:
From the AP:
The Dow is up 133, or 1.2 percent, at 11,517. The S&P 500 is up 15 points, or 1.2 percent, at 1,215. The Nasdaq composite is up 21, or 0.8 percent, at 2,577.
Update at 9 a.m. ET. Futures Up:
Immediately after the jobs report was released, futures for U.S. stocks perked up. The Chicago Tribune reports:
After hovering in the red for most of the premarket session Friday, Dow Jones industrial average, S&P 500 and Nasdaq futures turned 1 percent higher immediately after the report's release. Futures measure current index values against perceived future performance.
Update at 8:52 a.m. ET. World Markets React:
The Guardian reports that the employment news is already easing the U.K.'s FTSE, which had posted heavy losses earlier today:
The FTSE is now down some 50 points at 5343, after trading 95 points lower just before the figures were released. Futures indicate the Dow Jones will open 140 points higher. The dollar trimmed losses against the yen.
Update at 8:37 a.m. ET. Jobs Report:
The jobs report from the Bureau of Labor Statistics came in with slightly better numbers than expected: U.S. employers added 117,000 jobs last month and the unemployment rate dropped to 9.1 percent from 9.2 percent.
We've added a separate post on the news.
Update at 8:13 a.m. ET. Markets Seem To Have Caught Up With Economy:
On today's Morning Edition, Renee Montagne spoke to the Wall Street Journal's economics editor David Wessel, who said no one really knows what caused the big sell off yesterday.
He said that's especially true because the economic indicators have been pointing downward for some time now, yet the markets continued to gain. Wessel said it almost feels like the markets were so distracted by the debt ceiling debate in Washington, that when that was over they looked back and found that "bottom had fallen out of the market."
Wessel said that, indeed, the two big worries in the market are the U.S. economy and the European sovereign debt crisis, but one more thing that's spooking investors is that there's a perception that this time around it looks like governments don't have the ability to rescue economies.
The Federal Reserve, for example, doesn't "have a lot of bullets left." Interest rates are at zero, said Wessel, and another bond buying initiative would weaken the dollar and help exports but not by a ton.
The employment report due in minutes will be scrutinized, he said. If employers didn't pick up the pace, said Wessel, it'll "spread the fear that recession may have already begun."
Here's full of audio of Renee and Wessel's conversation:
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