Stocks Slammed on Dismal Jobs Report

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And with consumer spending now in question, concerns about sharper declines in corporate profits and an imminent recession take on more weight.

Although the data virtually cements the chances of a Fed rate cut on Sept. 18, "the August number is that bad, and revisions that great, that some say the Fed is behind the curve," S&P MarketScope said.

The payroll figures sent the Fed funds futures soaring, showing the market is priced for at least a 25-basis-point rate cut by the Fed on Sept. 18 and nearly 50 basis points by the next meeting on Oct. 31, Action Economics said. The economic research firm also noted some market talk of an emergency, inter-meeting rate cut.

"I think they'll try to get away with 25 basis points on the 18th," and then cut by another 25 points in October, said Bob Ried. "What happens between now and then will depend on whether credit markets, particularly money markets, continue to be tight or illiquid."

If the money markets prove to be illiquid, the Fed may not make it to Sept. 18 before it has to cut the Fed funds rate. Ried cited a nearly $300 billion, or 13.5%, contraction in the commercial paper market, most of which consists of asset-backed securities, in the past four weeks due to the inadequacy of the Fed's previous actions, such as cutting the discount window rate, which very few banks have taken advantage of.

During a conference call, Deutsche Bank Securities said the negative payrolls data removes the stigma the Fed would incur if it was to cut interest rates if people believed it was only acting to bail out the financial industry or to ease the credit crunch. But while a cut of 25 basis points in certain, Deutsche Bank said isn't ready yet to concede a 50-basis-point reduction.

Oil prices climbed on heightened geopolitical concerns amid news of air skirmishes between Israel and Syria and ahead of the OPEC meeting next week, which is expected to leave production levels unchanged. September West Texas Intermediate crude oil futures were up 40 cents to $76.70 per barrel.

Among stocks in the news on Friday, Beazer Homes (BZH) shares dropped 12.9% to a nearly-seven-year low after the company said it received a "purported notice of default" from the U.S. Bank National Association alleging the homebuilder is in default under indentures because it has not yet filed its quarterly results for the period ended June 30, 2007 with the Securities and Exchange Commission. Beazer denies it's in violation of some of its bank covenants.

Harley-Davidson was down 9.2% after cutting its third-quarter motorcycle shipment forecast by more than 91,000 to between 86,000 and 88,000. The company said it expects a modest decline in 2007 revenue, and estimated earnings would be 4% to 6% lower at $3.69 to $3.77 a share. It also said it sees the challenging U.S. retail motorcycle environment extending into 2008, with 4% to 7% earnings growth next year.

Krispy Kreme Doughnuts (KKD) shares plummeted 38.2% after it posted a net loss of 42 cents a share in the second quarter, vs. a 7-cents-a-share loss a year ago, on a 7.5% drop in revenue. The company said the results fell short of its expectations.

China Technology Development Corp. (CTDC) shares soared 29.4% on news the company has established a strategic partnership with Terra Solar Global Inc., a U.S. company pioneering in thin-film Photovoltaics. CTDC says it's the first and only Chinese company based in China to apply this new technology.

CB Richard Ellis (CBG) shares fell 7.8% after Lehman Brothers cut its price target on the commercial real estate services firm by $10 to $37 a share, and trimmed its 2007 earnings forecast by 5 cents to $2.25 a share and reduced its 2008 estimate by 10 cents to $2.75 a share. Lehman cited subprime mortgage fears and credit quality concerns that continue to weigh on the housing sector.

Pozen Inc. (POZN) shares leaped 27.9% after the company said that it and AstraZeneca AB (AZN) will begin a Phase III program for PN 400, a fixed-dose combination of the proton pump inhibitor esomeprazole magnesium, with the non-steroidal anti-inflammatory drug naproxen, in a single tablet. By mutual agreement, Pozen and AstraZeneca have also amended certain terms of their August 2006 collaboration and license agreement.

Shares of Apple Inc. (AAPL) fell 2.4% on UBS Financial's estimate that the $100 credit for Apple Stores being offered to iPhone users who paid full price for the product will cost the company $100 million in the third quarter. Standard & Poor's upheld its buy rating on the stock, saying the overall impact of the cost of the credits will be small.

World markets finished lower on Friday. In London, the FTSE 100 index fell 1.93% to 6,191.20. Germany's DAX index dropped 2.43% to 7,436.63. In Paris, the CAC 40 index slid 2.63% to trade at 5,430.10.

In Japan, the Nikkei index was off 0.83% to 16,122.16. In Hong Kong, the Hang Seng index slid 0.28% to 23,982.61. The Shanghai composite index fell 2.16% to 5,277.18.

Treasury Markets

Treasuries ignored weaker-than-expected wholesale sales data, which showed a 0.1% gain in July, focusing instead on the weak August jobs figures, Action Economics said. Yields plunged as investors continued to seek the safe haven of bonds.

The 10-year note jumped 1-01 to 102-30/32 for a yield of 4.38%, and the 30-year note surged 1-18 to 104-25/32 for a yield of 4.70%.

Bogoslaw is a reporter for BusinessWeek's Investing channel.