Bloomberg News

U.S. Stocks Fluctuate as Payrolls Report Offsets Services Data

February 05, 2014

U.S. Stocks Retreat After Private Jobs Report Misses Estimates

Traders work on the floor of the New York Stock Exchange on Feb. 4, 2014. Photographer: Jin Lee/Bloomberg

U.S. stocks fell, sending the Standard & Poor’s 500 Index to its third loss in four days, as a private report showing companies added fewer jobs than forecast overshadowed acceleration in service industries.

Cognizant Technology Solutions Corp. fell 4.3 percent on a disappointing forecast. Estee Lauder Cos. dropped 5.5 percent as its quarterly earnings prediction missed estimates. 3D Systems Corp. slumped 15 percent after its projection trailed expectations amid sluggish consumer demand. Genworth Financial Inc. and Radian Group Inc. rallied at least 2.8 percent after posting profits from insuring U.S. mortgages.

The S&P 500 fell 0.2 percent to 1,751.64 at 4 p.m. in New York. The Dow Jones Industrial Average lost 5.01 points, or less than 0.1 percent, to 15,440.23. About 7.4 billion shares changed hands on U.S. exchanges, 18 percent above the three-month average.

“There’s uncertainty around the economic outlook,” Walter Todd, who oversees about $950 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said in a phone interview. “People had a lot of confidence coming into this year that the economy was accelerating, and the recent set of economic statistics have thrown that into question.”

The S&P 500 (SPX) added 0.8 percent yesterday, rebounding from its biggest slide since June, as companies from Yum! Brands Inc. to Michael Kors Holdings Ltd. (KORS:US) reported profit that exceeded projections. The index is down 5.2 percent this year, and lost as much as 5.8 percent since reaching a record 1,848.38 on Jan. 15, the first decline of more than 5 percent since June 2013.

Healthy Decline

Should it follow the pattern from the 18 times that’s happened since 2009, the S&P 500 would fall to about 1,697 in the next week, then rebound to a new high by mid-April, according to data compiled by Bloomberg and Bespoke Investment Group.

The stock market’s decline this year is healthy and the S&P 500 probably will end 2014 higher, Leon Cooperman, chairman of hedge fund Omega Advisors Inc., said on Bloomberg Television.

BlackRock Inc. Chief Executive Officer Laurence D. Fink said in a separate interview that the recent market decline is a temporary setback as opposed to a departure from current economic growth.

“I look at this as a good old-fashioned correction,” Fink said today during an interview with Erik Schatzker and Stephanie Ruhle on Bloomberg TV’s “Market Makers.” Fink said BlackRock isn’t seeing long-term investors change their behavior.

‘Unravel Quickly’

The market may “unravel quickly” if the major indexes trade lower this week, Tom DeMark, the chief executive officer of DeMark Analytics LLC, said today in an interview on CNBC. If stocks fall today and open lower and trade lower tomorrow, he said, stocks are likely to continue falling regardless of Friday’s jobs data.

The Labor Department may report in two days that businesses added 188,000 employees in January after an 87,000 increase in December, according to the median forecast of economists surveyed by Bloomberg.

Companies added 175,000 payrolls last month as colder-than-normal weather limited progress in the U.S. job market, a report from ADP Research Institute in Roseland, New Jersey showed today. The median projection of 40 economists surveyed by Bloomberg called for an advance of 185,000.

“The market wants to see a happy report” on Friday and today’s ADP data “might mute them slightly,” Michelle Clayman, chief investment officer at New Amsterdam Partners in New York, which manages $1.6 billion. “The ADP number is not a bad number, but it’s certainly down from the rate of last time’s report and slightly below expectations so that’s making people a bit more cautious.”

Service Industries

A separate report today showed a gauge of service industries advanced more than forecast. The Institute for Supply Management’s non-manufacturing index increased to 54 in January from 53 the prior month. Readings greater than 50 signal expansion. The median forecast of 78 respondents in a Bloomberg survey called for a reading of 53.7.

The S&P 500 fell 3.6 percent in January, its first monthly decline since August as the Fed pared stimulus and emerging-market currencies slumped amid signs China’s economy is slowing.

Federal Reserve Bank of Philadelphia President Charles Plosser, who votes on policy this year, said today that he expects the economy to expand 3 percent in 2014 as the jobless rate falls to 6.2 percent by year-end, warranting a quicker tapering to bond purchases by the central bank.

Earnings Reports

Some 26 companies on the S&P 500 report quarterly results today. Profit for the benchmark’s stocks probably increased by 8.3 percent in the fourth quarter of 2013 and revenue by 2.5 percent, analysts’ estimates compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index added 4.4 percent today to 19.95. The gauge of S&P 500 options known as the VIX has surged 45 percent this year.

Six of 10 S&P 500 industry groups fell as energy, health-care and telephone shares sank at least 0.6 percent for the worst performance. Chevron Corp. lost 1.2 percent to $109.52, among the biggest drops in the Dow.

Cognizant fell 4.3 percent to $92.85. The provider of outsourcing services forecast adjusted earnings of at least $5.02 a share for 2014. That compared with the average analyst estimate for $5.08.

Estee Lauder (EL:US) retreated 5.5 percent to $65.36. The maker of cosmetics and skin care products said it expects to earn no more than 55 cents a share in the fiscal third quarter. That missed the average analyst estimate of 64 cents in a Bloomberg survey.

3D Systems

3D Systems tumbled 15 percent to $64.10. The maker of three-dimensional printers said it expects to earn 85 cents a share this year. Analysts, on average, estimated $1.29.

Gilead Sciences Inc. (GILD:US) slipped 4.7 percent to $78.15 even as fourth-quarter earnings beat analysts’ estimates, helped by rising sales from a new medicine for hepatitis C. Shares of the world’s largest maker of HIV drugs (GILD:US) more than doubled in the 12 months through yesterday.

Genworth (GNW:US) climbed 2.8 percent to $14.93 while Radian jumped 6 percent to $15.19. Genworth, which also offers life insurance and long-term care coverage, had a $6 million operating profit at its U.S. mortgage insurer, compared with a loss a year earlier. Radian reported net income of $36.4 million, after a $177.3 million loss in the last three months of 2012.

Myriad Genetics Inc. surged 15 percent to $31.29. The breast-cancer test provider forecast earnings in 2014 will be $2.09 to $2.12 a share. that’s higher from a November prediction that profit would be no more than $1.97 a share.

Sprint Corp. rallied 8.4 percent to $8.50. The company is getting close to securing $45 billion financing to make an offer for T-Mobile US Inc., DealReporter said, citing people familiar with the situation.

To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Nick Taborek in New York at ntaborek@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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Companies Mentioned

  • KORS
    (Michael Kors Holdings Ltd)
    • $81.13 USD
    • -0.91
    • -1.12%
  • EL
    (Estee Lauder Cos Inc/The)
    • $75.67 USD
    • -0.24
    • -0.32%
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