Stocks sink on worries about economic recovery

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By Associated Press

NEW YORK (AP) — The job market's already slow recovery looks to be losing momentum, and so is the manufacturing industry. New doubts about the economic recovery's strength on Wednesday knocked the Dow Jones industrial average down more than 100 points.

Private employers added just 38,000 jobs in May, down from 177,000 in April, according to payroll processor ADP. It's the weakest result since September. The report may offer a preview of Friday's more comprehensive job report from the Labor Department, which includes hiring by both private employers and the government.

"As far as we can tell, employers have hugely over-reacted to the surge in oil prices, which has slowed but not killed consumption," said Ian Shepherdson, chief U.S. economist for High Frequency Economics. The weak ADP results pushed him to cut his forecast for overall job growth in May to 75,000. He earlier had forecast Fridays' report to show growth of 175,000 jobs.

The ADP report has been wrong before as an indicator for the Labor Department's job report. Last month, it underestimated growth. The private sector added 268,000 jobs in April, according to the government.

Even the manufacturing industry, one of the economy's bright spots since the recession ended, is losing momentum. A report from the Institute for Supply Management showed manufacturing expanded in May for the 22nd straight month, but at its slowest pace since September 2009. The ISM's manufacturing index fell to 53.5 in May from 60.4 in April. A reading of more than 50 indicates the manufacturing industry is growing.

Manufacturers have benefited since the recession's end from stronger overseas demand, but China, India and other developing nations are struggling with inflation.

The Dow Jones industrial average dropped 117 points, or 0.9 percent, to 12,453 in morning trading. The S&P 500 index fell 12 points, or 0.9 percent, to 1,333. The Nasdaq composite fell 17 points, or 0.6 percent, to 2,819.

Treasury prices rose as investors moved into safer types of investments. The yield on the 10-year Treasury note, which moves in the opposite direction of its price, fell below 3 percent for the first time in 2011.

Reports on the U.S. economy have often been discouraging since the spring, raising worries about the strength of the recovery. Weaker-than-expected reports helped knock the S&P 500 index down 1.4 percent in May. The index had climbed 8.4 percent in 2011 through April on stronger corporate earnings, a recovering global economy and mergers and acquisitions.

Auto manufacturers will give updates through the day on their U.S. sales for May. Analysts expect total sales to be weaker than both a month ago and a year ago due to supply problems in Japan following the March earthquake, among other factors.

Construction spending rose 0.4 percent in April, according to a Commerce Department report. But it is still close to its lowest level in more than a decade

Sealed Air Corp. fell 3.4 percent after the maker of Bubble Wrap and other packaging, said it will buy Diversey Holdings for about $2.9 billion in cash and stock. Diversey provides cleaning products and sanitizers.

Dollar General Corp. fell 6.6 percent after the discount store operator's first-quarter profit growth fell short of analysts' expectations.

JoS. A. Bank Clothiers Inc. also reported first-quarter profit growth below analysts' expectations. The men's clothing maker fell 13.5 percent.

Lions Gate Entertainment Corp. rose 5.7 percent after the studio said it returned to a profit in its fiscal fourth quarter on lower distribution and marketing costs.