3 Reasons Markets Were Down as Unemployment Crushed the Dow and Gold Glittered

Markets closed down on Wall Street today: Dow -2.20%, S&P -2.53%, Nasdaq -2.58%, Oil -2.43%, Gold +3.02%.

On the commodities front, Oil (NYSE:USO) fell to $86.77 a barrel. Precious metals were up, with Gold (NYSE:GLD) climbing to $1,884.40 an ounce and Silver (NYSE:SLV) climbing 4.28% to $43.31 an ounce.

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Today’s markets were down because:

1) Unemployment. According to this morning’s Bureau of Labor Statistics report, nonfarm payroll employment was unchanged in August, and the unemployment rate held still at 9.1%, with 14.0 million unemployed in the U.S. Also, the change in total nonfarm payroll unemployment in July was downwardly revised from +117,000 to +85,000. While sectors from healthcare to mining to computer systems design all added jobs, their gains only helped to offset losses in other sectors, including local government jobs.

2) Greece. Talks between Greek officials and international inspectors over Greece’s next tranche of aid unexpectedly came to a halt Friday, after the two groups disagreed over why and by how much Greece’s deficit-reduction programs, a condition of the aid package, had fallen behind schedule. The International Monetary Fund, one of the main contributors to Greece’s aid package, initially said it planned to wrap up discussions by September 5, but now Greece’s lenders may be reconsidering issuing 8 billion euros of aid this month, as Greece hasn’t lived up to its side of the agreement in issuing significant spending cuts. While Greece is blaming its economy, which is expected to shrink by 5% this year, its lenders say the economy is only responsible for a quarter of its budget’s deviation. Greece’s deficit in 2011 is expected to be 8.6%, though Greece estimates it at 8.1%, well above the 7.6% target.

3) Banks. Over a dozen major U.S. banks (NYSE:KBE) are expected to be named in a Federal Housing Finance Agency lawsuit arguing that they misrepresented the quality of mortgage securities they packaged and sold leading up to the housing market collapse. The FHFA, which oversees mortgage firms Fannie Mae and Freddie Mac, is expected to seek billions of dollars in compensation, according to a published report. Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), and Deutsche Bank AG (NYSE:DB) are among the banks said to be targeted by the suit, and as such, have been leading today’s market sell-off. BAC shares are down 8.53%, GS is down 5.47%, JPM is down 4.66%, and DB is down 6.42%.

BONUS: Investigation to Reveal How Much Physical Gold is Held by SPDR Gold Trust ETF.

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