Ugly market drop raises fear that further losses could come

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For weeks, worries about Europe have dragged down stocks. On Friday, mounting concerns about the U.S. itself hit the market.

Investors were badly rattled by the May employment report. Non-farm payrolls increased by 431,000 last month, but that was due almost entirely to temporary hiring of census workers whose jobs will evaporate after a few months.

The report stirred fears that the U.S. economy is much weaker than thought. Bulls have repeatedly predicted that large-scale hiring was on the horizon, but the report indicated that the recovery in jobs could be slow and drawn-out.

That raises the prospect that the market correction, which appeared to be lifting just a week ago, could deepen.

“We were reminded today that in a post-bubble credit collapse, economic recoveries are typically fragile and susceptible to periodic setbacks,” David Rosenberg, chief economist at Gluskin Sheff, wrote in a note to clients this morning.

The Dow industrials fell below 10,000, sinking 323.31 points, or 3.2%, to 9,931.97. The S&P 500 shriveled 3.4%, the Nasdaq composite cratered 3.6% and the Russell 2000 slumped a full 5%.

The Dow is now down 11.4% from its late-April high, while the S&P is off 12.5%.

For anyone thinking about buying on stocks on weakness, the latest ferocious sell-off may coax them to hold off a bit to see if stocks dip further.

-- Walter Hamilton