* Grim U.S. jobs data for December rekindles economy worry
* U.S., European stocks fall, government debt prices rise
* Dollar rises vs euro but falls against yen on jobs data
* Oil prices slide as economic data suggests deep slowdown
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Jan 9 (Reuters) - U.S. stocks fell and bond
prices rose on Friday after data showing steep U.S. job losses
in December underscored the bleak outlook for a faltering
economy and the strain that will put on corporate profits.
Oil prices fell 2 percent, briefly sliding below $40 a
barrel, on the jump in the U.S. unemployment rate to 7.2
percent -- the highest level since January 1993.
Chevron Corp <CVX.N> led a slide in energy shares on both
sides of the Atlantic after it joined a growing list of
companies issuing profit warnings.
While payrolls were slashed a bit less than forecast,
economists had expected a lower jobless rate of 7 percent. That
helped push the U.S. dollar higher and put it on pace for its
best weekly gain in two months against the euro.
Traders bought back dollar after betting that the
government jobs report would be even more dismal.
U.S. stocks suffered their biggest weekly percentage drop
in seven weeks, with the Dow off 4.8 percent, the benchmark S&P
500 down 4.5 percent and the Nasdaq down 3.7 percent.
U.S. technology shares also took a beating on Wall Street,
causing the Nasdaq to briefly wipe out year-to-date gains as
such tech bellwethers as Apple Inc <AAPL.O> fell.
"We just keep seeing bad news. That's all we ever see,"
said Ryan Detrick, senior technical strategist at Schaeffer's
Investment Research in Cincinnati. "We really have to see the
economy, housing show some type of life."
The Dow Jones industrial average <> closed down 143.28
points, or 1.64 percent, at 8,599.18. The Standard & Poor's 500
Index <.SPX> was down 19.38 points, or 2.13 percent, at 890.35.
The Nasdaq Composite Index <> was down 45.42 points, or
2.81 percent, at 1,571.59.
Wall Street was pushed lower on a 5.7 percent tumble in the
shares of Citigroup Inc <C.N> after the bank said Robert
Rubin, a former U.S. Treasury secretary, had resigned as senior
counselor. Citigroup also said Rubin will not stand for
re-election as a director when his term expires.
News reports also said that Citigroup and Morgan Stanley
<MS.N> were in talks to merge their brokerage units. Morgan
Stanley shares rose 1.28 percent.
Chevron stock fell 1.4 percent, while Apple shares shed 1.8
percent.
In Europe, the FTSEurofirst 300 index <> of top
shares fell 0.5 percent to close at 866.95 points, ending the
first full week of trading in 2009 with a 1.2 percent gain.
U.S. and euro zone government debt prices rose after the
dismal U.S. jobs report, and grim European manufacturing data
for November signaled the region is also sinking further into
recession.
Expectations the tough employment environment will lead to
a very large government stimulus package and a vast issuance of
new government debt reined in U.S. bond price gains.
"The severity of the decline (in payrolls) indicates that
government is going to step up spending, which is going to keep
deficits very high," said Mary Ann Hurley, vice president of
fixed-income trading at D.A. Davidson & Co in Seattle.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
14/32 in price to yield 2.39 percent. The 2-year U.S. Treasury
note <US2YT=RR> gained 5/32 in price to yield 0.76 percent.
U.S. crude for February delivery <CLc1> settled down 87
cents at $40.83. London Brent crude <LCOc1> settled down 25
cents at $44.42.
"The overhang of bearish crude inventory continues to be
what is pressuring crude futures," said Dominick Chirichella,
senior partner at the Energy Management Institute in Point
Pleasant, New Jersey.
The dollar rallied in volatile trading, with investors
relieved that the U.S. jobs report was not as dismal as many
had feared.
Traders had positioned themselves for a gruesome non-farm
payrolls number following a U.S. private sector jobs report
earlier this week showing hefty losses of 693,000.
"The dollar has dodged an economic bullet," said Nick
Bennenbroek, head of currency strategy, at Wells Fargo in New
York. "Even though the report was generally discouraging, the
headline payrolls decline was broadly as forecast."
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 1.39 percent at 82.705. Against
the yen, the dollar <JPY=> was down 0.81 percent at 90.33.
In Europe, data showed German industrial output slumped 10
percent on the year, its fastest pace of decline since 1993,
while in France it fell a record 9 percent and in Spain by 15.1
percent.
"The financial crisis has pushed the German industry into a
condition of shock and awe," said Carsten Brzeski, economist at
ING Financial Markets. "In terms of economic growth, the fourth
quarter of 2008 will make history as the worst quarter ever."
The euro <EUR=> fell 2.22 percent to $1.342.
Gold ended lower in a back-and-forth session on the back of
a dollar bounce.
Spot gold prices <XAU=> fell $4.45 to $852.15.
The MSCI index of stocks in the Asia-Pacific region outside
Japan <.MIAPJ0000PUS> slipped 0.7 percent and Japan's Nikkei
share average <> finished 0.45 percent lower.
(Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss, Chris
Reese and Frank Tang in New York, and Christopher Johnson,
Kylie MacLellan and Brian Gorman in London; writing by Herbert
Lash; Editing by Dan Grebler)
