Dow falls below 12,000 after jobs report

By Charley Blaine and Elizabeth Strott

Stocks slid again today after a worse-than-expected jobs report added to worries about the health of the economy.

At the close, the Dow Jones Industrial Average was down nearly 147 points, or 1.2%, to 11,893.69, falling below the key 12,000 level for the first time since Nov. 3, 2006. The Dow had been down as much as 221 points before recovering a bit of its loss. The Dow plunged 215 points on Thursday.

The Nasdaq Composite Index finished with a loss of 8 points at 2,212.49; it had been down 34 points before coming back.

The Standard & Poor's 500 Index lost 11 points to 1,293.37 after falling as many as 22 points. The S&P had lost 29 points Thursday to 1,304, its lowest closing level since Sept. 22, 2006. The index did not fall under its Jan. 23 intraday low of 1,270.05.

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Stocks opened lower after the Labor Department reported that nonfarm payrolls fell 63,000 in February -- far worse than the gain of 20,000 to 25,000 jobs economists had expected.

It was the worst monthly decline since March 2003.

Stocks had looked like they were on their way to a rally this morning, with all three indexes in positive territory at one point earlier in the session.

"One thing to keep in mind is that the major indexes are down a little over 6% off of recent highs," Chris Conefry, trader at Madison Prop Trading, said. "Yes, there is poor economic data; however, that could be priced into what many believe is a range-bound tape. (This morning's) move could have been a case where there were too many people on one side of a trade, and the result could mean having to chase or cover positions in stocks that don't have real sellers," Conefry explained.

Financials were still relatively strong today, helped in part by a move earlier this morning from the Federal Reserve. Morgan Stanley (MS, news, msgs) closed up 19 cents to $39.86. Dow components JPMorgan Chase (JPM, news, msgs) and American International Group (AIG, news, msgs) held their own. JPMorgan closed up 0.5% to $37.56, and AIG was unchanged at $42.88.

More on the jobs report

Amid the jobs numbers, manufacturing and construction saw the biggest declines.

February's number follows a revised number for January nonfarm payrolls -- also bleak. January was revised lower to a decline of 22,000 from a decline of 17,000. December jobs were revised lower to a gain of 41,000 from a previous estimate of a gain of 82,000.

The unemployment rate ticked lower to 4.8% last month from 4.9% in January.

• Video: Inside today's jobs report

But that is an anomaly, one expert said. "This statistic was greatly affected by the fact that so many adults have become discouraged and have stopped looking for work," Peter Morici, University of Maryland School of Business professor wrote in a note to clients this morning. "Factoring in the decline in the number of adults participating in the labor force, the unemployment rate is closer to 6.8 percent," Morici wrote.

"Things are getting worse, not better. The housing market is evaporating. The financial system is a complete, utter mess," said Mark Zandi, chief economist at Moody's Economy.com, to CNBC after the jobs report was released. "We need to see fiscal policy response. If we don't see it, this thing is going to be long and severe, not mild."

Another analyst had a different perspective. "I think this is a normal de-leveraging process. It had to be done," said Vince Farrell, chairman of Scotsman Capital Management, also on CNBC. "I don't think we're in a recession yet. The number we saw today is a pronounced slowdown, but the last recession we had saw well over 200,000 jobs per month wiped out. We got drunk and now we're sobering up."

Appearing to anticipate the bad news, the Federal Reserve was active this morning, as well, announcing a measure likely to increase liquidity to financial institutions. The Fed said it is boosting its term auction facility to $100 billion. Basically, auction facility is a means of making loans to banks, The Fed also said it is in close consultation with its foreign central bank counterparts.

• Video: The Fed takes action

"I think (this is) helping," Conefry said, "but more from a psychological perspective. Anytime you have the Fed being proactive that's a good thing. It's hard to quantify the effect now, but stimulation is stimulation."

In a speech in Paris, San Francisco Federal Reserve President Janet Yellen told policymakers there that "the U.S. economy is particularly exposed to downside risks from the unwinding of the housing bubble and disruptions in financial markets."

Yet Yellen made it plain that the Fed has an eye on inflation, as well, remarking that the central bank "cannot afford to take for granted that inflation expectations will remain well-anchored."

S&P hits key technical level

On Wall Street, technical analysts were on the alert for a key test of support.

"People panic when lows break,'' said Ryan Detrick, senior technical analyst at Schaeffer's Investment Research, to Bloomberg News. "The one everybody was watching was January 22."

That day, the S&P closed at 1,310.

"A weak close today would lead us to expect a test of temore important long-term support at the January (intraday) low" of 1269.70, MKM Partners' chief market technician wrote in a note to clients this morning. If the S&P falls below that 1,270 level, it could fall to 1,219, Detrick said.

"The hits just keep on coming," said Robert Pavlik, chief investment officer at Oaktree Asset Management, to MarketWatch.com. "Trying to stay optimistic and long-term focused is extremely hard at this point. You don't know what's coming up."

Light, sweet crude finished down 32 cents to $105.15 a barrel, after closing at another record Thursday, up 95 cents at $105.47 a barrel.

"Unless the dollar can stage a major recovery, fund buying ebbs, geopolitical risks ease or there is a more profound economic slowdown threat, the market's trend will likely remain up, and an eventual move to the $110 to $115 price range can't be ruled out," analyst John Kilduff at futures brokerage MF Global, said in a research note to clients.

Citigroup reduces mortgage holdings

With the mortgage-market meltdown taking its toll on the financial sector, Citigroup (C, news, msgs) late Thursday said it is reducing its mortgage assets by $45 billion over the next 12 months, a 20% reduction in the value of the holdings as of December 2007.

Citi also said that by the third quarter, it plans to securitize or sell to Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs) 90% of the loans it originates, up from 65% in 2007.

Shares of Citigroup were down 26 cents, or 1.2%, to $20.91. The stock has plunged more than 55% in the past year.

It's been a tough week for Citigroup. Earlier this week, Chief Executive Officer Vikram Pandit tried to assuage investors' worries about the company's health after Merrill Lynch analyst Guy Moszowski slashed his first-quarter estimate for the bank and pegged Citi to write down $15 billion on bad subprime bets in the current quarter. A Dubai investor also speculated that Citigroup needs more capital. On Wednesday, however, Pandit said that Citigroup was well capitalized.

The banking giant lost $9.83 billion in the fourth quarter of 2007.

Ambac raises capital

Troubled bond insurer Ambac Financial (ABK, news, msgs) said this morning that it raised $1.5 billion by selling shares and convertible securities.

"We believe that our Ambac Assurance subsidiary will maintain its triple-A financial strength ratings," said Chief Executive Michael Callen in a press release. Several high-quality, sophisticated private-equity firms participated, Callen told CNBC this morning. Callen did not name the firms.

"We are in a tough environment, there is no question of that," Callen said, noting that he is "amazed we were able to raise more than our market value in the market we had yesterday with all the rumors going around about our company."

• Video: Ambac CEO on its move to boost capital

Ambac has been in the news all week as the company has been struggling to maintain its AAA rating amid the mortgage-market mess. As the mortgage market started to slide, the value of many of the bonds Ambac insures declined, thus putting Ambac's rating at risk. Companies like Ambac need the top rating to keep their costs under control.

Shares of Ambac jumped 28% to $9.50.

National Semi beats The Street

Shares of chip maker National Semiconductor (NSM, news, msgs) jumped $1.91, or 11.7%, to $18.25 this afternoon after the company late Thursday reported better-than-expected fiscal-third-quarter profit.

While National Semi said profit fell slightly to $71.2 million, from $73.7 million in the same quarter last year, earnings per share rose to 28 cents, from 22 cents per share, because the company repurchased shares in the quarter.

• Video: Million-dollar homes

The consensus estimate on Wall Street was for earnings of 23 cents per share.

Revenue rose 5.2% to $453.4 million, below the $457.4 million analysts had expected.

"Our business was impacted by lower-than-expected shipments into the wireless handset and personal mobile device markets," said CEO Brian Halla in a press release.

The company's fourth-quarter profit forecast of $440 million to $460 million was lower than analysts' estimates of $467.1 million.

Chip makers have been struggling with falling prices and weak demand lately, but the Philadelphia Semiconductor Index was up 0.6% today to 344.62.

Shares of Intel (INTC, news, msgs), a Dow component, were up 20 cents, or 1%, to $20.07. Advanced Micro Devices (AMD, news, msgs) was unchanged at $6.49.