Traders work on the floor of the New York Stock Exchange
Traders work on the floor of the New York Stock Exchange, Feb. 1, 2011. REUTERS

U.S. stocks dropped as a spike in oil prices (driven by deepening unrest in Libya) overshadowed a strong February jobs report.

The Dow Jones Industrial Average tumbled 88.32 points, or 0.72 percent, to 12,169.88. The S&P 500 index dropped 9.82 points, or 0.74 percent, to 1,321.15. The Nasdaq composite index slipped 14.07 points, or 0.50 percent, to 2,784.67.

Crude oil futures in New York climbed by more than 2.6 percent to almost $105 a barrel, the highest such level since September 2008. The potential for a political stalemate in Libya is raising fears that oil production will be truncated and higher energy prices will derail the global economic recovery.

On the bright side, the Labor Department said the jobless rate dipped to 8.9 percent from 9 percent last month – and has now fallen for the third months in a row. American employers added 192,000 jobs in February,

Financial stocks were especially hut hard – Citigroup (NYSE: C) fell 2.99 percent, while Bank of America (NYSE: BAC) lost 1.05 percent.

Bond prices climbed as the yield on the 10-year Treasury note fell to 3.49 percent.