HOLLYWOOD — Entertainment and media stocks were hammered Friday amid a broad market selloff as investors, spooked by a surprisingly bad employment report, began to foresee a much longer advertising slump.
The Labor Dept. released figures Friday morning showing a decline of 125,000 jobs during August and an unemployment rate that jumped to 4.9% from 4.5% in July. Even the most bearish Wall Street analysts had not expected such bad numbers, and the shock rolled through the markets, sending the Dow Jones Industrials Average down 234.99 points to close at 9605.85, a drop of 2.39%. The benchmark S&P 500 was off 1.86%.
Among media congloms, AOL Time Warner and Viacom, both heavily advertising dependent, were hardest hit, down more than 8% and 5%, respectively. Disney and Vivendi Universal, already beaten down, declined 1.55% and 1.85%, in line with the broader market. News Corp. fell 3.67%, and Sony was off 1.71%.
Investors also weren’t buying the old saw that pure-play entertainment companies are countercyclical because people want to be entertained, especially in tough economic times. MGM was off 4.95%, and Blockbuster fell 8.3%.
With unemployment rising, economists are worried that declining consumer spending could push the economy into a full recession by the end of this year or beginning of next year. At best, an upturn will not happen until well into next year, and possibly later.