NEW YORK, 7 August 2004 — Anemic US job growth figures sent stocks and the dollar down and safe-haven bonds up yesterday, as the data raised new concerns about the pace of recovery in the world’s largest economy.
Gold, also viewed as a safe bet in times of trouble, surged past the $400-an-ounce mark for the first time in two weeks.
“The dollar has tanked, bond yields have dropped, and equities are dropping like a stone. Not a good day for the US markets nor for President Bush,” said Andrew Busch, global foreign exchange strategist, at BMO Nesbitt Burns in Chicago. US nonfarm payrolls rose a paltry 32,000 in July, despite median forecasts for a rise of 228,000.
“This is shockingly low and that’s two months in a row now,” said Robert MacIntosh, chief economist at Eaton Vance Management.
The disappointing jobs data stoked investor concerns that the recovery was weakening, pointing to slower profit growth. “This casts a huge shadow over consumer spending going forward. You got softer job growth and you got softer wage growth,” said Jeffrey Saut, chief investment strategist for Raymond James Financial. “I think we are going to be locked in a trading range for a lot longer than most people think.” The data sent three major US stock indexes to new intraday lows for the year. The blue-chip Dow has lost more than 240 points in the past two days.
The Dow Jones Industrial Average was down 90.48 points, or 0.91 percent, at 9,872.55. The Standard & Poor’s 500 Index was down 9.16 points, or 0.85 percent, at 1,071.54. The technology-laced NASDAQ Composite Index was down 24.67 points, or 1.35 percent, at 1,796.96. Overseas, the FTSE Eurotop 300 index of pan-European blue chips fell 75.5 points, or 1.7 percent, to 4337.9. Japan’s benchmark Nikkei average fell 88.32 points to 10,972.57, its first close below the 11,000 mark since May 25.
The dollar slumped across the board as the payroll numbers cast doubt over the pace of the Federal Reserve’s campaign to raise interest rates.
In late morning New York trade, the euro soared to a session high against the dollar at $1.2268. The dollar fell roughly 1.5 percent against the yen to 110.01 yen. Against the Swiss franc, the dollar dropped to a session low of 1.2515 francs. Sterling rose more than 1 percent to $1.8450. Treasury prices rallied after the jobs report challenged government optimism that the economy would bounce back strongly after a slowdown last quarter.
The benchmark 10-year note leaped 1-13/32 in price, sending yields crashing to 4.23 percent from 4.41 percent late Thursday. At one stage yields delved as deep as 4.16 percent, the lowest level since April and a world away from the 4.65 percent highs hit just last month. Five-year notes climbed 31/32 in price, driving yields down to 3.40 percent from 3.61 percent on Thursday. Thirty-year bonds rose two full points, while their yield dropped to 5.03 percent from 5.17 percent.
October gold rose to $404.00 an ounce to mark its highest since July 21. Spot gold rose to $400.75 on the data and then eased to $399.20/9.70, up from $392.60/3.10 late Thursday in New York. London’s afternoon fix was $399.00.