News of an unexpected loss of 63,000 payroll jobs in February drove U.S. equities lower today, while the Federal Reserves plan to add liquidity to the banking system failed to alleviate concern over the credit crunch.
The Dow Jones industrial average closed down 145.48, or 1.22%, at 11,894.91 the first close under the 12,000 mark since Jan. 22. The S&P 500 fell 11.00, or 0.84%, ending at 1,293.34, the first time it has closed below 1,300 since Sept. 11, 2006. The Nasdaq composite closed down 8.01, or 0.36%, at 2,212.49. All numbers are preliminary.
The largest drop in payroll jobs since March 2003 revived concern of a looming recession, which would further hurt the U.S. housing sector, and pressure mortgage and credit markets.
One thing the weak job report explains is why consumer attitudes have dropped off by so much. The job market is very important to the consumer, said Robert Brusca, chief economist at consultancy FAO Economics.
The Federal Reserve today said it is increasing by $100 billion the amount banks can borrow at the Feds Term Auction Facility, a lending program it created last year to ease the credit crunch. As a result, the amount of cash available at TAF auctions set for March 10 and March 24 was increased by $20 billion each to $50 billion each, according to a Fed statement. The Federal Reserve will increase these auction sizes further if conditions warrant, the statement also said, adding the TAF auctions will be held for at least the next six months unless financial markets improve.
Also, starting today, the Fed will conduct 28-day repurchase transactions of up to $100 billion and allow primary dealers to use mortgage-backed securities as collateral.
The financial sector was in the spotlight after trading was halted in Amsterdam in shares of Carlyle Capital Corp. after the leveraged buyout firm failed to meet margin calls from lenders. Also, Thornburg Mortgage said in a statement it has failed to meet $610 million in margin calls and was trying to negotiate a solution to satisfy its lenders.