Gary Lamphier

Disappointing U.S. jobs report pounds stock markets, energy prices.

The worst U.S. jobs report in a year sent stock markets reeling Friday, clobbering energy prices, renewing fears of a return to recession, and stoking speculation that the Federal Reserve may be forced to roll out another round of stimulus.

Just 69,000 new jobs were added last month, less than half the consensus forecast of 150,000 and well below the roughly 125,000 new jobs needed to keep up with U.S. population growth.

Meanwhile, downward revisions for March and April reduced previous monthly estimates by 49,000 jobs, boosting the U.S. unemployment rate to 8.2 per cent from 8.1.

With the U.S. economy sputtering, China in slowdown mode and the debt crisis in Europe growing darker by the day, investors dumped stocks across the board, from Toronto to New York to London.

If not for soaring gold stocks, Toronto’s S&P/TSX Composite Index would have fared even worse. Canada’s equity benchmark plunged 152 points or 1.3 per cent Friday to 11,361.20.

On top of the 780-point decline in May, Toronto’s lead index has now fallen about 930 points or 7.6 per cent since the end of April.

With oil prices falling by $3.30 US a barrel in New York, energy stocks were the biggest losers in Toronto. The S&P/ TSX Capped Energy Index slid more than 3.2 per cent, closing at the lowest level since early 2009.

Since April 30, the price of West Texas Intermediate, the benchmark grade of U.S. light crude, has plunged more than $21 a barrel to $83.23, as a gusher of new supplies overwhelmed the market.

The latest declines have left investors and analysts wondering where the bottom is.

Many expected oil to rebound once it hit the $90 level.

Now, some predict the price could sink to about $75 before the slide ends.

If so, that could leave some higher-cost oilsands operations perilously close to break-even, and could cause some new projects to be deferred.

In New York, where the Dow Jones Industrial Average suffered its biggest decline in two years last month, the blue chip index plunged a further 275 points or 2.2 per cent Friday to close at 12,118.60. After posting its strongest first-quarter increase since 1998, the Dow has now erased all of its gains for 2012.

Other major U.S. indexes also got slammed, with the S&P 500 Index losing nearly 2.5 per cent to close at 1,278.04, and the technology-laden Nasdaq Composite Index down 2.8 per cent to 2,747.48.

“The weak jobs report confirms that the U.S. is vulnerable to a European situation that is going from bad to worse,” Mohamed El-Erian, CEO of PIMCO, the world’s largest bond fund manager, told Bloomberg.

“The report’s details speak to an unemployment crisis that is getting more stubbornly embedded in the structure of the economy. Looking forward, the employment situation will be further challenged by an ongoing synchronized global slowing.”

Although U.S. corporate profits are expected to hit a record high in 2012, and the S&P 500 is trading at less than 13 times earnings — more than 20 per cent below its 50-year average — gun-shy investors are fleeing to the safety of U.S. Treasuries and shunning stocks.

Shares of McDonalds’s Corp., Microsoft, IBM, Oracle, General Electric, Boeing, Ford Motor, Apple and many other big-name stocks are all down sharply since April.

In Toronto, gold issues such as Barrick, Goldcorp and AgnicoEagle were among the few big winners amid Friday’s rout. No other sector was spared, as major bank and insurance stocks got whacked along with resource stocks.

Facebook also continued its losing ways Friday, shedding $1.88 or 6.3 per cent to close at $27.72 on Nasdaq. The social networking giant’s stock has dropped by $10.28 or 27 per cent since it went public two weeks ago in one of the most disastrous IPOs of the past decade.

Friday’s market fireworks have triggered renewed talk that the Fed will be forced to intervene soon by launching a third round of quantitative easing, or QE3.

Morgan Stanley, the Wall Street investment bank, says it now puts the odds of QE3 at 80 per cent, up from 50 per cent previously.

The Fed’s last effort at market intervention, known as Operation Twist, is scheduled to expire this month.