Dow Loses 2012 Gain on Jobs as Stocks Fall

For the fourth time in five weeks, U.S. stocks tumbled, essentially annihilating the entire year’s gain. This has raised new concerns that the global economy is in worse condition than some were predicting. At a minimum, there are no longer any ways to deny Europe’s growing crisis.

Facebook and Labor

This news also comes after Facebook’s disastrous public offering and on the same day the Labor Department released disturbing employment numbers. The Standard & Poor’s 500 Index slumped 2.5 percent yesterday, which is the first time a drop this significant has been seen since November.

Facebook plunged 13 percent to $27.72 after questions regarding how well the social networking site would recover with a 27 percent decline in the first several days.

It was reported homebuilders saw a devastating 10 percent drop as more Americans were opting to buy homes versus building them.

The short work week might have provided a much needed three day weekend, but the sliding indexes, the surprising drop in new home builds and a host of other critical financial bodies reporting less than promising news and outlooks, the big question is how long will it last before the economy really begins to recover?

S&P Factor

The S&P 500 lost 3 percent to 1,278.04 for the week, cementing its own trim gain for the year to 1.6 percent. The Dow dropped 336.26 points – 2.7 percent – to 12,118.57. This puts it it below 2011’s closing level and also eliminates in its entirety a year-to-date rally that had been 7.1 percent as of the beginning of May.

One consultant says this is simply folks who are de-risking and using a more cautious approach. Joseph Keating said,

It’s unclear what policies would be put in place by the European leaders to basically facilitate whatever is going to happen in Greece, along with how to hold the banking system in Europe together.

EU Summit

There’s another dynamic at play. The EU Summit, which kicks off later this month, will bring together Germany, Spain, Italy and France in an effort to restore confidence. The nations’ leaders will meet in Rome. With incredibly high borrowing costs finally beginning to ease, it appears concerns of sovereign bailouts might be fading. The summit begins June 28 and lasts two days.

It’s absolutely crucial this summit provide insight and ultimately solutions, otherwise, it could lead to “progressively greater speculative attacks on individual countries, with harassment of the weaker countries,” Italy’s Mario Monti said. Without it, much of the continent would be forced into even higher interest rates, keeping the domino effect moving forward. Monti was also quoted as saying this would be the “direct opposite” of what’s needed for a strong economic recovery and ultimately, economic growth.

Concerns over a global halt, coupled with the crisis in Europe, the S&P was down, as well. In fact, in May alone, it lost more than 6 percent. With all eyes on Spain and Greece, questions are being asked as to whether or not either are able to remain in the game. Further, equities declined once the the monthly employment figures and other data was announced which only cemented doubts about the economic slowdown in the U.S. Yields on 30-year and 10-year debt tare also at record lows.

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