Stocks slump on job market jitters

Click the chart for more stock market data. By Annalyn Censky, staff reporterMay 4, 2011: 11:10 AM ET

NEW YORK (CNNMoney) — Stocks slipped Wednesday, as disappointing reports on jobs and the services sector revived jitters about the economy.

The Dow Jones industrial average (INDU) slipped 115 points, or 0.9%; the S&P 500 (SPX) shed 12 points, or 0.9%; and the Nasdaq (COMP) fell 21 points, or 0.8%.

Chevron (CVX, Fortune 500) and Caterpillar (CAT, Fortune 500) were the biggest drags on the Dow, with Intel (INTC, Fortune 500) helping offset losses on both the Dow and tech-heavy Nasdaq.

Before the opening bell, payroll processor ADP said the private sector created 179,000 jobs last month — down from 207,000 in the previous month. That was less than the 200,000 economists had been expecting.

Later in the morning, the Institute for Supply Management also brought gloomy news, showing its reading on the services sector fell to an 8-month low in April.

Neither reports spur much confidence ahead of the government’s widely anticipated report on April payrolls, due Friday.

“People might be slightly more nervous about the economic outlook,” said Sireen Harajli, an associate economist at Credit Agricole in New York. “There’s a shadow of uncertainty going forward.”

Stocks have been generally been trending higher since the start of the year, but investors fear the economy is still on shaky ground.

While Congress faces a looming debt ceiling, Europe is still dealing with its debt crisis.

Early Wednesday, Europe’s debt problems were thrust back in the spotlight, after Portugal agreed to a $116 billion financial bailout to deal with the European Union and the International Monetary Fund, according to reports.

On Tuesday, U.S. stocks struggled for a second session as disappointing corporate earnings, and a steep drop in the price of oil, weighed on the broader market.

Economists are waiting to see just how hard businesses were hurt by rising energy prices over the last few months.

Economy: In addition to ADP’s report on job creation, outplacement firm Challenger, Gray & Christmas issued a report showing employers announced fewer planned job cuts in April — even as government sector layoffs mounted.

Wednesday’s reports on the job market set the stage for Friday’s widely anticipated government jobs report.

Economists surveyed by CNNMoney expect the unemployment rate to hold steady at 8.8%, while employers added 185,000 jobs in April. For the full year, economists expect 2.3 million new jobs — just under 200,000 per month — and an unemployment rate of 8.4% by year end.

Companies: Chinese social networking site Renren (RENN) debuted on the New York Stock Exchange at $14 a share. Often dubbed the ‘Facebook of China,’ Renren shares quickly rose 33% to $18.66 a piece.

Before the opening bell, CNNMoney parent Time Warner said a surge in advertising sales boosted revenue. But net income dropped. Shares of Time Warner (TWX, Fortune 500) fell 2% in morning trading.

Time Warner’s results come on the heels of better-than-expected earnings from CBS Corp. (CBS, Fortune 500) announced the day before. CBS shares rose 5.6% Wednesday morning.

After the close, investors will get results from News Corp (NWS, Fortune 500)., Prudential Financial (PRU, Fortune 500), WholeFoods (WFMI, Fortune 500), MetLife (MET, Fortune 500), and video game publisher Electronic Arts (ERTS, Fortune 500).

Earlier Wednesday, shares of Varian Semiconductor (VSEA) surged more than 50%, on news that Applied Materials (AMAT, Fortune 500) will buy the chipmaker in a $5 billion cash deal.

World markets: European stocks slid in midday trading. Britain’s FTSE 100 lost about 1%, while the DAX in Germany edged down 0.6% and France’s CAC 40 fell 0.1%.

Asian markets ended lower. The Shanghai Composite dropped 2.3%, and the Hang Seng in Hong Kong shed 1.4%. Japan’s market was closed for a holiday.

Currencies and Commodities: The dollar lost ground against the euro, the British pound and the Japanese yen.

After losing more than 2% in the previous session, oil for June delivery fell an additional 35 cents to $110.70 a barrel Wednesday.

Other commodities also continued to sell-off.

Gold futures for June delivery fell $1.40 to $1,538.90 an ounce.

Silver futures for July delivery dropped $1.02 to $41.57, after sinking more than 7% in the previous session.

Bonds: Bond prices were little changed. The price on the benchmark 10-year U.S. Treasury slipped slightly, pushing the yield up to 3.26%. 

First Published: May 4, 2011: 9:41 AM ET