NEW YORK, Sept 8: Wall Street shares sank on Friday as data showing a surprise drop in US payrolls, the first in four years, stoked fears that the world’s biggest economy is flagging.

The Dow Jones Industrial Average tumbled 214.28 points (1.60pc) to 13,149.07 and the Nasdaq slid 54.25 points (2.08 per cent) to 2,560.07 at 1455 GMT.

The broad-market Standard & Poor’s 500 index slumped 23.98 points (1.62 per cent) to 1,454.57.

Ahead of the bell, the Labor Department reported nonfarm payrolls fell by 4,000 in August. That was the first drop in employment in four years and far below Wall Street expectations of a gain of 110,000 jobs.

The report, one of the best indicators of economic momentum, underlined fears that the real estate crisis and a credit squeeze are taking a toll on the US economy.

This was a lousy jobs report, said Nigel Gault, economist at the research firm Global Insight.

Employment fell for the first time in four years, and the bad news was widely spread. Manufacturing was down sharply, construction fell, private service job growth decelerated, and government jobs fell.”Many analysts said the Federal Reserve, which has said the economy up to now has weathered the housing downturn, now must consider rate cuts to keep the economy from sliding into recession.

The data suggests that the current economic situation is worse than previously expected and elevates the probability that the Fed will cut interest rates, said Fred Dickson, market strategist at DA Davidson & Co.

The yield on the 10-year US Treasury bond slid to 4.409 per cent from 4.500 per cent Thursday and that on the 30-year bond fell to 4.720 per cent from 4.790 per cent. Bond yields and prices move in opposite directions.

Financial stocks were pressured by the economic fears and concerns about tighter credit. Bear Stearns slid 3.34 per cent to 104.07 dollars after a brokerage downgrade, while Lehman Brothers fell 2.4 per cent to 52.54 and Morgan Stanley lost 1.55 per cent to 61.53.

Apple dropped 3.23 per cent to 130.65 as the tech giant remained in the spotlight after cutting the price by 200 dollars of its new iPhone device, enraging customers who had paid full price.

Hovnanian Enterprises slid 2.7 per cent to 11.06, after the home builder reported it swung to a loss on higher contract cancellations.---AFP