NEW YORK — Slammed hard by the soaring price of crude-oil futures, which on Friday closed at a record high, and a rise in the unemployment rate, U.S. stocks more than wiped out weekly gains, with the Dow chalking up the eighth-largest point drop in the blue chip index’s history.
“It looks crazy because we’ve had such a low unemployment rate for the past three years. But it’s all about the oil, and today was not a pretty ride,” said Art Hogan, chief market strategist at Jefferies & Co.
The Dow Jones industrial average fell 394.64 points, or 3.1 percent, to 12,209.81, giving it a weekly loss of 3.4 percent.
The Dow’s decline, which left all 30 of its components in the red, is the heaviest hit in terms of points lost since Feb. 27, 2007, when it fell 416.02 points. Heavy losses were posted by the likes of American International Group Inc. and General Motors Corp.
The Standard & Poor’s 500 fell 43.37 points, or 3.1 percent, to 1,360.68, leaving it down 2.8 percent for the week. Financials and consumer discretionary led sector declines, with the former off 4.8 percent and the latter down 4.3 percent.
The technology-dominated Nasdaq composite shed 75.38 points, or 3 percent, to 2,474.56 for a weekly decline of 1.9 percent.
The major indexes were prepped for an opening drop by the Labor Department’s pre-open report that the unemployment rate in May rose to 5.5 percent. Economists had forecast a far smaller 0.1 percentage-point gain in the unemployment rate, to 5.1 percent.
But the skyrocketing price of crude oil proved to be the stocks market’s major undoing.
Helping trigger the surge in crude was the dollar’s decline, which fell sharply one day after the European Central Bank opted to leave its key lending rate unchanged at 4 percent.
Crude futures reached a record of $139.01 in electronic trading on Globex, an all-time high for a front-month future contract, while July crude climbed $10.75, or 8.4 percent, to end at $138.54 a barrel on the New York Mercantile Exchange and climbed as high as $138.80 earlier on.
“Tough talk from Israel, where an official there said attacks on Iran’s nuclear facilities looked ‘unavoidable,’ has ramped up geopolitical concerns. If all that is not enough, a U.S. investment bank has raised its oil price forecast to $150 a barrel by July 4th,” said Action Economics analysts.
“The jobs report is going to dominate everyone’s attention,” said Phil Orlando, equity market strategist at Federated Investors. “The nonfarm payrolls data was fine.
“In fact, it was a little better than expected, but what is going to be the headline in every paper in America tomorrow is the unemployment rate spiked to 5.5 percent. If people over the course of the day start to focus on wage inflation, nonfarm numbers, etc., we might do better after a sloppy opening. Or investors may decide to shift to the price (rise) of crude over the last two days and sell on that,” Orlando said in outlining a scenario that played out during the session.
