S&P 500 Caps Worst Week in ’12 on Disappointing Jobs Data

May 5 (Bloomberg) -- Bloomberg’s Trish Regan, Adam Johnson and Matt Miller report on today’s ten most important stocks including Fluor, LinkedIn and Berkshire Hathaway. (Source: Bloomberg)

U.S. stocks declined a third day, giving the Standard & Poor’s 500 Index its worst week in 2012, after data showing employers added fewer jobs than forecast intensified concern about the pace of economic recovery.

Energy (S5ENRS) shares in the S&P 500 slumped 2.2 percent after oil fell below $100 a barrel for the first time since February. Chevron Corp. (CVX), Bank of America Corp. and Intel Corp. (INTC) dropped at least 2.1 percent. American International Group Inc., the bailed-out insurer, tumbled 3.8 percent as sales decreased at its largest units. The Nasdaq-100 Index (NDX) slid 2.5 percent, the most since November, as Apple (AAPL) Inc. slipped 2.9 percent.

The S&P 500 fell 1.6 percent to 1,369.10 at 4 p.m. New York time, extending its weekly drop to 2.4 percent. The Dow Jones Industrial Average slumped 168.32 points, or 1.3 percent, to 13,038.27 today. About 7.1 billion shares changed hands on U.S. exchanges, or 7 percent above the three-month average.

“The data point to sluggish job growth, declining labor market participation and for those employed, stagnant purchasing power,” Mohamed El-Erian, the chief executive officer of Pacific Investment Management Co., said in an e-mail today. “Consumption is less dynamic at a time when headwinds from Europe and a potential fiscal cliff are still material.”

Stocks slumped as payrolls climbed 115,000, the smallest gain in six months and below the estimate for a 160,000 advance. The jobless rate unexpectedly fell to a three-year low of 8.1 percent as people left the labor force. Concern about Europe’s debt crisis also helped send stocks slower as services and manufacturing output in the euro region shrank and France, Germany and Greece prepared for elections this weekend.

More Stimulus

Equity futures briefly rose after the jobs report was released this morning as some investors speculated the Federal Reserve may consider additional steps to boost growth. If economic data continue to disappoint, the Fed may announce a third-round of asset purchases, or quantitative easing, according to Keith Wirtz, at Fifth Third Asset Management.

A negative reading in a measure of forecasting accuracy shows data have been worse than economists expected. The Citigroup Economic Surprise Index was at minus 23.40 today. The gauge a year ago plunged into negative figures ahead of an economic soft patch that prompted the Fed, in an initiative dubbed “Operation Twist,” to replace $400 billion of short- term debt in its portfolio with longer-dated securities.

“The labor report may be the first beat on the drum for QE3,” said Wirtz, who oversees $15 billion as chief investment officer for Fifth Third Asset Management in Cincinnati. “As we proceed into summer, watch the releases. Negative beats will lead to Fed actions before Labor Day -- ironic by accident.”

More Than Doubled

Since reaching a 12-year low in March 2009 (SPX), the S&P 500 has more than doubled amid government’s stimulus measures and as corporate profits beat estimates for the 13th straight quarter. The gauge has fallen 3.5 percent from an almost four-year high on April 2 on weaker-than-forecast economic reports.

A three-day retreat trimmed this year’s rally in the S&P 500 to 8.9 percent. Nine out of 10 groups in the S&P 500 fell as technology and energy shares slumped at least 2.1 percent. The Morgan Stanley Cyclical Index of companies most-tied to the economy lost 1.7 percent. Chevron sank 2.1 percent to $103.72. Bank of America slid 3.3 percent to $7.74. Intel slid 2.3 percent to $27.90. Apple slipped 2.9 percent to $565.25.

AIG (AIG) tumbled 3.8 percent to $32.83. Sales at Chartis, which insures commercial property, corporate boards and airplanes, fell 3.8 percent to about $8.82 billion as the company sought to pare risks. Premiums, deposits and other considerations at the SunAmerica life insurer slid about 13 percent to $5.6 billion.

Earnings Peak

CF Industries Holdings Ltd., the largest U.S. producer of nitrogen-based fertilizers, retreated 6.9 percent to $183.91 on bets quarterly earnings may be at a peak. Factory outages, delayed imports and early crop planting have helped to drive nitrogen-fertilizer prices higher, Charles Neivert, an analyst at Dahlman Rose & Co., said in a note. Those market conditions “will be hard to exceed or even replicate in the near future.”

Southwestern Energy Co. (SWN) had the biggest decline in the S&P 500, sinking 7.2 percent to $28.73. The natural gas producer reported first-quarter sales and earnings that missed analysts’ estimates.

LinkedIn Corp. (LNKD) surged 7.2 percent to $117.30, the highest price since its market debut in May 2011. The biggest professional-networking website reported first-quarter sales and profit that beat analysts’ estimates amid a jump in membership.

About 71 percent of S&P 500 companies that reported results since the start of the earnings season have topped projections, according to data compiled by Bloomberg.

Micron Gains

Micron Technology Inc. (MU) added 1.2 percent to $6.55 amid speculation that the memory chipmaker may try to acquire the assets of Elpida Memory Inc. cheaply after a potential rival dropped out of the bidding. Micron has no comment on rumor or conjecture, said Dan Francisco, a spokesman for Micron.

Federal Reserve policy isn’t designed to prop up U.S. stock prices as many people believe, according to David Einhorn, president of Greenlight Capital LLC.

“The real Fed put is under the bond market,” the hedge- fund manager wrote in a commentary yesterday on the Huffington Post website. He was referring to a put option, which sets an asset’s minimum price for a later sale.

Stocks and bonds have often moved in opposite directions during the past three months. The S&P 500 and a Treasury note and bond index, compiled by Bloomberg and the European Federation of Financial Analysts Societies, were used in the comparison.

Near Zero

“The Fed has all but guaranteed that it will do what it takes to stop bond prices from falling” by promising to keep its target interest rate near zero through 2014, according to Einhorn, based in New York.

The Bloomberg/EFFAS index was 0.2 percent higher for the year through yesterday after rebounding from losses in February and March. Those declines followed gains in January that lifted the indicator to a record.

Central bankers don’t understand investor psychology, Einhorn wrote. “If you want to get people to sell bonds and buy stocks, the best way to do that is to show them that bond prices can, and do, fall.”

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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