The Standard & Poor’s Index (SPX) erased almost all its gains as an escalation in tension over Syria overshadowed slower-than-forecast jobs growth that eased concern about reductions in Federal Reserve stimulus.
Airlines slipped 0.9 percent as a group as crude oil rose to a two-year high. Mattress Firm Holding Corp. dropped 15 percent after cutting its forecast. American Tower (AMT:US) Corp. climbed 4.6 percent after agreeing to acquire the parent company of rival Global Tower Partners for about $3.3 Billion. Lennar Corp. and D.R. Horton Inc. jumped at least 1.9 percent to pace gains among homebuilders as bond yields plunged.
The S&P 500 rose less than 1 point to 1,655.17 at 4 p.m. in New York. The gauge swung 1.5 percentage points during the session, the widest since June 24. The Dow Jones Industrial Average slipped 14.98 points, or 0.1 percent, to 14,922.50, snapping a three-day winning streak. About 5.9 billion shares changed hands on U.S. exchanges, in line with the three-month average.
“It’s a very skittish stock market,” John Augustine, who helps manage $27 billion as chief market strategist at Cincinnati-based Fifth Third Bancorp, said in a phone interview. “We’re in a period where markets will react quickly to external news from a variety of sources, whether it’s the bond market, the Middle East, or one single economic report.”
The S&P 500 erased gains of as much as 0.6 percent in the final hour of trading after a report from Al-Arabiya, citing unidentified activists, said forces for the regime of Bashar al-Assad shelled Damascus with gas.
The report stoked concern that the U.S. could take military action in Syria even as President Barack Obama acknowledged domestic and international resistance to his call for a strike. One of the biggest hurdles to Obama’s efforts has been put up by Russian President Vladimir Putin.
Equities started the day higher before falling as much as 0.9 percent to the lowest level of the day after Putin said at the Group of 20 summit that his country will assist Syria if strikes are launched. Putin is Assad’s most powerful ally.
The S&P 500 recovered the losses by 11 a.m., turning higher as investors turned back to a Labor Department jobs report that eased concern about the size of potential Fed stimulus cuts. Employers added 169,000 workers last month, missing the median forecast of 180,000 in a Bloomberg survey of 96 economists. The unemployment rate unexpectedly fell to 7.3 percent as more people left the labor force.
Central-bank stimulus has helped drive a global equity rally, with the S&P 500 rising as much as 153 percent from its bear-market low in 2009. The U.S. gauge fell as much as 4.6 percent from an Aug. 2 record as speculation grew that the Fed would begin winding down its monetary support after its next meeting on Sept. 17-18.
Today’s report on weaker jobs growth hasn’t derailed economists’ expectations that the Fed this month will taper its monthly bond buying by $10 billion, to $75 billion, according to the median of 34 responses today in a Bloomberg News survey of economists. That was unchanged from an Aug. 9-13 poll, as was a projection that the program will end in June.
“What the jobs report told us is that it’s a slow recovery, but it’s a recovery, so that while the Fed is likely to taper in September, it won’t be surprising to see a tiny taper as the Fed tries to wean the market off quantitative easing,” Kristina Hooper, a U.S. investment strategist at Allianz Global Investors in New York, said in a phone interview. Her firm oversees $409 billion. “It could be an almost Goldilocks scenario where you have just enough tapering to satisfy the hawkish sentiment but too little to impact stock.”
Fed Bank of Chicago President Charles Evans, a voter on policy this year, said today the central bank shouldn’t taper until inflation and economic growth pick up. Esther George, the Fed Bank of Kansas City president who has consistently dissented against additional stimulus, called for tapering at this month’s meeting while cautioning that such reductions may prompt market volatility.
The S&P 500 capped a 1.4 percent advance over the holiday-shortened week for the biggest weekly increase since July 12.
The Chicago Board Options Exchange Volatility Index (VIX), or VIX, gained 0.5 percent to 15.85, snapping a three-day advance. The equity volatility gauge is down 12 percent this year.
Half of 10 main S&P 500 groups fell as consumer-discretionary and raw-materials companies each slipped 0.2 percent. Utility shares rose 0.6 percent for the best performance.
The Bloomberg U.S. Airlines Index dropped 0.9 percent amid concern rising oil prices will boost fuel costs. Delta Air Lines Inc. lost 1.8 percent to $19.89 while US Airways Group Inc. declined 1.1 percent to $16.80.
Mattress Firm tumbled 15 percent to $35.59. The mattress retailer cut its profit forecast as same-store sales fell in the second quarter.
Smith & Wesson (SWHC:US) Holding Corp. fell 10 percent to $10.31. The handgun manufacturer forecast earnings to be no more than 22 cents a share in the fiscal second quarter. That trailed the average analyst estimate of 29 cents in a Bloomberg survey.
Real-estate shares jumped 2.1 percent for the best performance among 24 industries in the S&P 500. American Tower rallied 4.6 percent to $71.91. The biggest operator of cellular towers in the U.S. agreed to acquire MIP Tower Holdings LLC, giving it thousands of additional wireless sites as appetite for next-generation services grows.
An S&P index of homebuilders rebounded from a 12-month low, rising 2 percent, as a drop in bond yields eased concern that surging borrowing costs will hurt a housing recovery. Yields on 10-year Treasury notes fell the most in 10 months.
Lennar advanced 2.3 percent to $32.25. D.R. Horton climbed 1.9 percent to $18.10.
Facebook (FB:US) Inc. climbed 3 percent to a record $43.95. The owner of the world’s largest social-networking service had its share-price estimate boosted to $55 from $40 at SunTrust Robinson Humphrey Inc.
E*Trade Financial Corp. climbed 4.6 percent to $16.26. Goldman Sachs Group Inc. raised its recommendation on the online brokerage to buy from neutral.
Timken (TKR:US) Co. rose 2.1 percent to an all-time high of $61.52. The maker of ball bearings agreed to spin off its steel unit, dropping opposition to a plan pushed by Ralph Whitworth’s Relational Investors LLC after a shareholder vote and a Goldman Sachs Group Inc.-led review favored the split.
VeriFone Systems Inc. jumped 10 percent to $22.81, the highest since June 4. The maker of credit-card terminals forecast fourth-quarter sales of at least $418 million, topping the average analyst estimate of $412.9 million.
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