A Wave of Weak Data Capsizes Stocks

The main culprits in Friday's sell-off: A weak July employment report and lower factory orders in June. Treasuries surged as investors sought shelter

Stocks finished solidly lower on Friday, with investors bailing out on concerns the U.S. economy might be slipping back into recession, following reports on soft payrolls and factory orders.

The Dow Jones industrial average tumbled 193.49 points, or 2.27%, to 8,313.13. The tech-heavy Nasdaq composite index was off 32.12 points, or 2.51%, to 1,247.88. The broader Standard & Poor's 500-stock index was down 20.41 points, or 2.31%, to 864.24.

Among Friday's economic releases, the Labor Department said a modest 6,000 new U.S. jobs were created in July. The job total was far below Wall Street economists' expectations, while the unemployment rate held steady at 5.9%, the same as in June. The June jobs gain was revised up to 66,000 from the 36,000 reported a month ago and left an overall impression of lackluster job markets, according to wire-service reports.

In corporate news, shares of AOL Time Warner (AOL ) closed off more than 5%. The Securities and Exchange Commission investigation of the media group has expanded to include a probe of the company's former business relationship with software firm PurchasePro Inc., according to several news reports.

Also under pressure were shares of Walt Disney Co. (DIS ), which posted sharply lower profit in its third quarter due to weakness at its theme parks. Shares of Disney closed down more than 9%.

And in technology, National Semiconductor (NSM ) cut its fiscal first-quarter revenue forecast, warning revenues will remain flat in the fourth quarter due to a weak personal computer market, according to wire reports. Its stock shed more than 2%.

A few big names are scheduled to post quarterly earnings reports next week. Consumer-products giants Procter & Gamble (PG ) and Clorox (CLX ) are slated for Monday and Wednesday, respectively, while tech titan Cisco Systems' (CSCO ) eagerly awaited release is set for Tuesday.

Treasury Market

U.S. Treasuries surged higher in price Friday following the weak jobs data and losses in equities. According to S&P MMS, market talk that one of the more high-profile Wall Street firms expects the Fed to ease aggressively (75 basis points) in the fourth quarter to keep the economy from slipping further contributed to a huge bull move in Treasuries, especially in shorter-dated issues. The yield on the 2-year note fell to a new all-time low of 1.968%. The yield on the 5-year note also fell to a record low of 3.170%.

In other economic news, factory orders fell 2.4% in June to $313.19 billion -- the sharpest rate in seven months -- after a 0.6% increase in May, the government said. The May increase was revised from a previously reported 0.7% increase, according to wire-service reports.

Additionally, consumer spending climbed solidly in June. The Commerce Department said consumer spending rose 0.5% in June after holding steady in May. Spending in May had originally been reported as down 0.1%.

Meanwhile, personal income in June increased 0.6%, its biggest advance since a matching rise in July, 2000. The June income gain followed a 0.4% May rise, a notch stronger than originally reported.

Looking ahead to economic reports due the week of Aug. 5, the July non-manufacturing ISM report is due Monday. On Wednesday, June wholesale inventories and consumer credit data will be released, while Thursday brings the July Producer Price Index numbers. Plus on Friday, preliminary second quarter productivity data is due.

Treasury market players will also focus on the $40 billion Treasury refunding scheduled for next week.

World Markets

European markets finished mixed. In London, the Financial Times-Stock Exchange 100 index added 31 points, or 0.77%, to 4,075.50, as UK construction index edged up to 54.7 in July from 54.3 in June.

In France, the CAC 40 was up 4.66 points, or 0.14%, to 3,245.37. And in Germany, the DAX Index was down 73.96 points, or 2.05%, to 3,532.49.

In Asia, the markets finished lower. The Nikkei was down 83.85 points, or 0.86%, to 9,709.66, on worries about the U.S. economy. In Hong Kong, the market lost 188.30 points, or 1.85%, to 9,991.72.

Before it's here, it's on the Bloomberg Terminal.