* Stocks fall as jobs news underscores depth of recession
* Dollar falls after weaker-than-expected ADP report
* Crude oil slides in largest percentage drop in 7 years
* Concern over raft of new debt supply again hits bonds
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Jan 7 (Reuters) - U.S. stocks fell about 3
percent and oil prices plunged the most in seven years on
Wednesday after surprisingly large job losses and a sharp rise
in crude inventories reminded investors that the U.S. economy
still faces stiff head winds.
The dollar fell, reversing sharp gains against the euro and
yen earlier this week, as the steep job losses in the U.S.
private sector reignited fears of a deep recession.
A disappointing revenue outlook from technology bellwether
Intel Corp <INTC.O> and Alcoa Inc's <AA.N> plans to cut more
than 15,000 jobs, halve capital spending and sell businesses
also heightened concerns about the severity of the recession.
While separate data showed planned layoffs at U.S. firms
eased in December from the previous month's seven-year high,
they were still up 275 percent annually as the 12-month-old
recession cuts a wide swathe through the U.S. economy.
But a report from ADP Employer Services that said U.S.
private employers shed a more-than-expected 693,000 jobs in
December, up from a revised 476,000 jobs lost the previous
month, sent the most shivers through financial markets, also
helping to drive down European stock markets on fears about the
global economy.
The ADP report foreshadows likely grim employment data for
December from the U.S. Labor Department on Friday and
underscored the challenges facing President-elect Barack Obama
to revive the economy with a $775 billion stimulus package.
"The ADP report reinforces the view that things could get
worse than expected and we're already expecting a long period
of weakness," said Meg Browne, a currency strategist, at Brown
Brothers Harriman in New York.
Recession fears were heightened after Intel, the world's
biggest maker of semiconductor chips, issued its second revenue
warning for the fourth quarter since November, citing weakening
demand for personal computers.
Intel was among the main laggards on the Nasdaq, falling
6.1 percent to $14.44, while top U.S. aluminum maker Alcoa slid
10.2 percent to $10.89.
"It all of a sudden hit everyone that it's preannouncement
season and it's impossible to forecast in a recession," said
Tim Ghriskey, chief investment officer of Solaris Asset
Management in Bedford Hills, New York. "When reality hits it
can shock people."
The Dow Jones industrial average <> fell 245.16 points,
or 2.72 percent, at 8,769.94. The Standard & Poor's 500 Index
<.SPX> slid 28.05 points, or 3.00 percent, at 906.65. The
Nasdaq Composite Index <> lost 53.32 points, or 3.23
percent, at 1,599.06.
European shares ended lower, snapping a six-day winning
streak, as the weak U.S. employment data weighed on sentiment
and commodity stocks were hit by lower crude and metal prices.
The pan-European FTSEurofirst 300 <> index of top
European shares closed down 1.3 percent at 877.85.
Oil prices slid 12 percent, the largest percentage drop
since 2001, after the U.S. Energy Information Administration
reported a much greater-than-expected rise in crude
inventories, in a sign of weakening demand amid the global
economic slowdown.
Crude oil stocks swelled by 6.7 million barrels, more than
seven times the 900,000-barrel increase analysts had expected.
Gasoline and distillate stocks also rose as refinery
utilization climbed and demand remained sluggish.
U.S. crude for February delivery <CLc1> settled at $42.63 a
barrel, down $5.95, in the biggest single-day percentage drop
since prices plunged 15.25 percent on Sept. 24, 2001.
"This is a very bearish report. Crude stocks are up due to
higher imports," said Tom Knight, a trader at Truman Arnold in
Texarkana, Texas. "The build in products is also bearish."
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> down 0.69 percent at 82.25.
Against the yen, the dollar <JPY=> fell 1.08 percent at 92.65.
The euro <EUR=> rose 0.87 percent at $1.3624.
U.S. Treasury debt prices fell amid renewed concerns that a
spate of new debt supply will dilute the market, despite more
evidence of a dire U.S. employment backdrop.
A total of $166 billion of new government debt supply is on
tap this week, with more expected in order to help feed various
programs intended to prop up the economy. The size of this
week's issuance is the third largest ever.
Investors fear the huge doses of new debt issuance will
boost Treasury note yields, which move inversely to prices and
which remain not far off 50-year lows.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
7/32 in price to yield 2.48 percent. The 30-year U.S. Treasury
bond <US30YT=RR> fell 25/32 in price to yield 3.04 percent.
Gold dropped nearly 3 percent to a two-week low as the
worsening job data dashed hopes of an inflation-driven gold
rally in the near term.
Gold for February delivery <GCG9> settled down $24.30 to
$841.70 an ounce in New York.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> rose 0.5 percent, on track for an eighth
consecutive session of gains, before turning negative on the
ADP report.
Japan's Nikkei share average <> rose 1.7 percent.
(Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss, Chris
Reese and Frank Tang in New York and Alex Lawler and Joanne
Frearson in London; writing by Herbert Lash, Editing by Leslie
Adler)
