Equities Get Double-Teamed by the Euro and May Jobs Report

Stocks fall
Stocks fall

The euro cratered Friday, and so did the stock market. Heightened anxiety over the European debt crisis (thanks, Hungary) would have been more than sufficient to ensure Wall Street would have a bad day. A truly dismal jobs report meant equities never stood a chance. The blue-chip Dow shed more than 300 points as traders fled risk for the relative safety of the dollar, gold and Treasurys.

Word that Hungary could join the ranks of European governments staring at insolvency pretty much ensured that global stock markets would be awash in red Friday. The euro hit a new four-year low against the dollar, breaking below the psychologically significant $1.20 level. That helped boost the buck, as the U.S. Dollar Index, which measures the greenback against a trade-weighted basket of six major currencies, rose 1.3% -- a huge move in currency terms.

And then "the number" came out. The private payrolls data were pretty much a disaster, making the labor market look a lot squishier than anyone thought. "Too few private sector jobs -- and much lower than expected at that -- with too many temporary positions and too much evidence that government hiring drove what there was of the number in the latest reported period -- turned more than a few stomachs on the trading desks across the world, John Stoltzfus, market strategist at Ticonderoga Securities, told clients Friday.

The Dow Jones Industrial Average ($INDU) fell 323 points, or 3.2%, to close at 9,932, while the broader S&P 500 ($INX) lost 38, or 3.4%, to 1,065. The tech-heavy Nasdaq Composite ($COMPX) dropped 84 points, or 3.6%, to settle at 2,219.

Lipstick on a Pig?

The jobs data did provide some slivers of solace of the bulls, wrote David Rosenberg, chief economist and strategist at Gluskin Sheff. Hours worked inched up, and wages rose. "This is truly encouraging news, but considering so much of this was driven by temporary Census hiring, the durability is still in question," Rosenberg said.

Additionally, the broader measure of unemployment ticked down last month, and the manufacturing sector added jobs (29,000 this time) for the fifth straight month. Whether these are silvers linings or just lipstick on a pig remains to be seen, but there's no doubt expectations heading into the employment report were far too inflated.

"The consensus was completely giddy believing that we were going to see a 180,000 [gain in private payrolls] today," Rosenberg wrote. "Instead, we got a putrid 41,000 increase."