Ugly Jobs Report, $150 Oil Forecast Rocks Stocks

It feels like summer today outside on Wall Street. Too bad traders are acting like it's early March (again) after the economy's most worrisome sectors—banking and the consumer—showed new signs of trouble ahead. A huge, half-point jump in the unemployment rate to 5.5 percent is the latest headwind for stocks, and shares of retailers and other vulnerable sectors continued to falter under the threat of lower consumer spending.

Wal-Mart, the nation's biggest retailer and one of the best-performing stocks in the sector since this slowdown started, saw shares fall after hitting a new 52-week intraday high Thursday. Options traders seem to be weighing just how much more upside there will be. The SPDR S&P Retail ETF slipped more than 3.5 percent.

 If that weren't enough, oil jumped $7 a barrel after Morgan Stanley said crude prices would hit $150 by July 4. That sent airlines shares, which had rallied a bit this week, back into dangerous declines. AMR, Continental, Delta Airlines, and US Airways all fell about 7 percent, dashing hopes that huge capacity cuts and layoffs would revive investor interest in a badly battered sector.

Then there's banks. Regulators are out in full force this week, and the hangover from the credit crisis may just be starting. National City is basically on probation after entering into a "memorandum of understanding" with regulators as they dig into its finances, the Wall Street Journal reports. The Cleveland-based bank could be the first of several mid-sized financial firms facing problems ahead. The Journal also says insurer American International Group is being investigated by the SEC for overvaluing subprime-mortgage-related swaps. Shares of National City and AIG are now trading at their lowest levels in more than a decade.

Even good news is being met with a shrug. Take-Two Interactive, maker of the hugely popular "Grand Theft Auto IV," swung to a quarterly profit of $98.2 million (compared with a $51.3 million loss a year ago), but shares rose just a nickel on the news.

Broad weakness means traders will be leaning toward the same sectors that have outperformed for much of the year, including commodities, energy, and infrastructure. Both the Philadelphia Oil Service Sector and Gold/Silver indexes were up more than 2 percent.