* Stocks fall as jobs news underscores depth of recession
* Dollar falls after weaker-than-expected ADP report
* Concern over raft of new debt supply again hits bonds
* Oil falls; U.S. crude stocks rise more than expected
(Recasts with U.S. markets, changes byline, dateline; previous LONDON)
By Herbert Lash
NEW YORK, Jan 7 (Reuters) - Stocks and the price of oil fell on Wednesday after reports on greater-than-expected job losses and crude inventories reminded investors betting on a looming recovery that the U.S. economy is still very weak.
The dollar fell across the board, reversing sharp gains against the euro earlier this week, as the steep job losses in the U.S. private sector reignited fears of a deep recession.
A disappointing revenue outlook from technology bellwether
Intel Corp
While separate data showed planned layoffs at U.S. firms eased in December from the previous month's seven-year high, they were up 275 percent annually as the 12-month-old recession cuts a destructive swathe through the U.S. economy.
But a report from ADP Employer Services that said U.S. private employers shed a more-than-expected 693,000 jobs in December, up from a revised 476,000 jobs lost the previous month, sent the most shivers through financial markets.
The ADP report foreshadows likely grim labor data for December from the U.S. Labor Department on Friday and underscored the challenge facing President-elect Barack Obama to revive the economy with a $775 billion stimulus package.
"I can't imagine this (ADP data) is going to bode very well for any kind of forecasting going into the nonfarm payroll and unemployment rate numbers that we're going to see on Friday," said Dave Lutz, a managing director at Stifel Nicolaus in Baltimore. "It is absolutely terrible."
In early afternoon trade, the Dow Jones industrial average <.DJI> was down 175.63 points, or 1.95 percent, at 8,839.47. The Standard & Poor's 500 Index <.SPX> was down 18.89 points, or 2.02 percent, at 915.81. The Nasdaq Composite Index <.IXIC> was down 35.14 points, or 2.13 percent, at 1,617.24.
Also weighing on stocks was a Time Warner Inc
European shares ended lower, snapping a six-day winning streak, as weak U.S. employment data weighed on sentiment and commodity stocks were hit by lower crude and metal prices.
The pan-European FTSEurofirst 300 <.FTEU3> index of top European shares provisionally closed down 1.3 percent at 877.85.
Stocks fell after the recent run-up in prices and were hurt by the suicide of German billionaire Adolf Merckle, which gave credence to the depth of the credit crisis and its damage to Germany, said David Buik, a partner at BGC Partners.
The ADP jobs report and decline in U.S. mortgage applications only adds to the grim sentiment, Buik said.
"This has been a wake-up call for the European markets. Sentiment has changed and profit takers have come in," he said.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> down 1.12 percent at 81.897.
Against the yen, the dollar
The euro
Oil slid more than 7 percent after a U.S. government report
showed inventories of crude rose much more than expected. U.S.
light sweet crude oil
Crude oil stocks rose by 6.7 million barrels, the U.S. Energy Information Administration said, more than the 900,000 barrel increase analysts expected. Gasoline and distillate stocks also rose.
"This is a very bearish report. Crude stocks are up due to higher imports," said Tom Knight, a trader at Truman Arnold in Texarkana, Texas. "The build in products is also bearish."
U.S. Treasury debt prices fell over continued concerns that a spate of new debt supply will dilute the market, despite the ADP report's indications of a dire U.S. employment situation.
A total of $166 billion of new government debt supply is on tap this week, with more expected in order to help feed various programs intended to prop up the U.S. economy.
Investors fear the huge doses of new debt issuance will boost Treasury note yields, which move inversely to prices and which remain not far off 50-year lows.
The benchmark 10-year U.S. Treasury note
U.S. gold futures dropped 3 percent to a two-week low as investors sold heavily after signs of a worsening U.S. job market dashed hopes of an inflation-driven gold rally.
The MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> rose 0.5 percent, on track for an eighth consecutive session of gains, before turning negative on the ADP report.
Japan's Nikkei share average <.N225> rose 1.7 percent. (Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss, Chris Reese and Frank Tang in New York and Alex Lawler and Joanne Frearson in London; writing by Herbert Lash, Editing by Chizu Nomiyama)