Wall St dives on economic doubts

Interest rates are unlikely to shift upwards soon

Wall Street's main stock indexes dropped heavily on Monday as investors reacted to the news late last week that US unemployment hit an eight-year high of 6% in April.

Investors' confidence in government and central bank predictions that an economic recovery is underway and set to gain strength in the second half of this year is waning, according to analysts.

"There are a lot of people waiting to see if we are really coming out of recession," said Arnie Owen, managing director of capital markets at Roth Capital Partners. "I just think we are in a malaise."

The technology-weighted Nasdaq index lost most ground, closing down 2.1% at 1578.48.

The Dow Jones industrial average shed almost 200 points. It ended the session down 1.98% at 9,808.04, its lowest close since 19 February.

The broader Standard & Poor's 500 lost 1.93% to end at 1,052.67.

Watching the Fed

"It appears we are in a buyers' strike," said Alan Ackerman of Fahnestock and Co.

Some investors were waiting to see what comes from the US Federal Reserve's meeting on Tuesday, traders said.

With recovery still fragile, few economists expect the central bank to begin to raise rates from their current 40-year low for a few months yet.

Further rate cuts are even less likely.

Iraq's decision to resume oil exports also pulled down the oil majors.

Shares in oil giant ExxonMobil lost $1.34 to close at $39.25, contributing to the drop in the Dow Jones index.

Oil and gas stocks within the S&P 500 dropped 6.03%.

Figures released by the Labor Department on Friday showed unemployment reached 6% in April, its highest monthly level since mid-1994.

But the US economy grew by more than 5% in the first three months of this year.