Stock futures drop after unemployment rate jumps

By SARA LEPRO AP Business Writer

NEW YORK (AP) - Stock futures sank Friday after the government said more jobs were lost in October than expected, pushing the unemployment rate above 10 percent for the first time since 1983.

As futures fell, safe-haven assets like Treasurys and the dollar rose. Oil prices plunged.

The Labor Department said employers cut 190,000 jobs last month, less than the 219,000 jobs lost in September, but more than the 175,000 job losses economists had forecast. The unemployment rate jumped to 10.2 percent from 9.8 percent in September.

The market has been expecting unemployment to top 10 percent before peaking. But the pace of job losses has accelerated and is likely to go higher.

The report bodes poorly for consumer spending, a major component of economic activity. Consumers will keep a tight lid on their spending if they are worried about losing their jobs. And robust consumer spending is necessary to sustain the economic recovery.

Dow Jones industrial average futures fell 65, or 0.7 percent, to 9,889, after being up about 15 points prior to the report. Standard & Poor's 500 index futures fell 8.10, or 0.8 percent, to 1,055.10, while Nasdaq 100 index futures fell 8.75, or 0.5 percent, to 1,710.50.

Bond prices rose, driving yields lower, as demand for the safety of government debt increased after the disappointing jobs report. The yield on the benchmark 10-year Treasury note fell to 3.49 percent from 3.53 percent late Thursday.

Investors also sought safety in the dollar, which reversed an early slide and moved slightly higher against other major currencies.

Oil plunged $2.13 to $77.49 a barrel in electronic premarket trading on the New York Mercantile Exchange. Gold added about $2 to $1,091 an ounce.

The worse-than-expected jobs report is a blow to investors' confidence in the economic recovery, stoked Thursday by an encouraging outlook from Cisco Systems Inc., better data on productivity and higher sales at major retailers. The Dow Jones industrials soared 203 points on the day's string of good news to close above 10,000 for the first time in two weeks.

For stocks to drop after such a big advance would not be unusual for the market, which lately has swung wildly between gains and losses as investors battle mixed signals on the economy.

The government said last week that the economy expanded 3.5 percent in the third quarter. Much of that growth was driven by stimulus measures that, once removed, could slow the economic rebound. Earlier this week the Federal Reserve said economic conditions were improving, but it kept interest rates at a record low to support an ongoing recovery.

Later Friday, investors will also get reports on wholesale inventories and consumer credit.

Overseas, Japan's Nikkei stock average rose 0.7 percent, while Hong Kong's Hang Seng index jumped 1.6 percent. In afternoon trading, Britain's FTSE 100 fell 0.9 percent, Germany's DAX index dropped 1.2 percent, and France's CAC-40 gave up 1.3 percent.