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U.S. Stocks Erase Gains as Optimism Over Jobs Data Fades

Oct. 5 (Bloomberg) -- Bloomberg’s Trish Regan, Josh Lipton and Adam Johnson report on today’s ten most important stocks including Hewlett-Packard, Zynga and Home Depot. (Source: Bloomberg)

U.S. stocks erased gains, after an early rally among benchmark indexes, as optimism about an unexpected drop in the American unemployment rate faded and Apple Inc. shares slumped.

Apple tumbled 2.1 percent, helping to reverse an early advance among technology shares. Bank of America Corp. (BAC) dropped 1 percent after surging as much as 2.6 percent. Zynga Inc. (ZNGA) slid 12 percent after cutting its forecast for full-year bookings. Avon Products Inc. climbed 7.2 percent as the door-to-door cosmetics seller said Andrea Jung will step down as executive chairman.

The Standard & Poor’s 500 Index fell less than 0.1 percent to 1,460.93 at 4 p.m. in New York, after climbing as much as 0.7 percent. The index rose 1.4 percent this week. The Dow Jones Industrial Average added 34.79 points, or 0.3 percent, to 13,610.15, the highest level since December 2007. Volume for exchange-listed stocks in the U.S. was 5.7 billion shares, or 4.6 percent below the three-month average.

“Today’s trading is a pattern we’ve seen before this week, with a strong start and then we give up gains later in the day,” Frederic Dickson, who helps oversee about $32 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon, said in a phone interview. “There’s still a lot of the dark cloud of the European financial situation hanging over the market, which sets the tone for the short-term intraday trading.”

The unemployment rate unexpectedly fell to 7.8 percent in September, the lowest since President Barack Obama took office in January 2009, as employers took on more part-time workers. The economy added 114,000 workers, in-line with economists’ estimates, and August’s growth was revised higher by 46,000 jobs to 142,000.

November Elections

Today’s employment report is the penultimate before the November elections as Obama and challenger Mitt Romney debate whose policies would best spur job growth.

“The report is a step in the right direction, but I doubt the champagne corks are popping at the Federal Reserve,” John De Clue, the Minneapolis-based global investment strategist at U.S. Bank Wealth Management, which oversees $113 billion, said in a telephone interview. “Most market participants are probably looking at this in the context of the presidential election rather than in the context of any fundamental change in the economy because we’re still at an unemployment rate that’s not making the Fed happy.”

In Europe, Prime Minister Mariano Rajoy said Spain hasn’t taken a decision on whether to seek a bailout and any decision will be based on Spaniards’ best interests. Spain needs to consider all the conditions, Rajoy said at a meeting with other leaders in Malta today, reiterating the government’s position.

‘Still Assessing’

“It was really started earlier this afternoon when Spain’s prime minister again reiterated that the country is still assessing bailout possibilities and that nothing is imminent,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview. His firm oversees $250 billion in assets. “Also, Apple continues to be under pressure and is flirting with key technical support levels.”

The S&P 500 has rallied 16 percent this year as central banks from the U.S. to China took steps to stimulate economic growth. The benchmark index reached the highest level since 2007 last month as the Fed announced a third round of quantitative easing, saying it will purchase mortgage-backed securities at a pace of $40 billion per month until labor markets “improve substantially.”

Apple Tumbles

Apple, (AAPL) the world’s largest company by market value, dropped 2.1 percent to $652.59 today, falling below its average price from the past 50 days. The decline helped erase an advance for technology shares in the S&P 500.

Banks reversed an early rally. Bank of America dropped 1 percent to $9.32. Goldman Sachs Group Inc. (GS) slid 0.5 percent to $119.31. Citigroup Inc. (C) erased 0.5 percent to $34.77.

Zynga plunged 12 percent to $2.48 as the online-game maker cut its forecast for full-year bookings, a predictor of sales, citing lower demand for titles such as “The Ville.”

Bookings this year will be in the range of $1.085 billion to $1.1 billion, compared with an earlier forecast of $1.15 billion to $1.225 billion, Zynga said after markets closed yesterday. The San Francisco-based company also wrote down the value of its acquisition of OMGPop Inc.

Facebook Inc. (FB) slipped 4.7 percent to $20.91. Zynga makes most of its money by selling virtual goods in games played on Facebook’s social network.

First Solar Inc. (FSLR), the world’s biggest maker of thin-film panels, lost 11 percent to $20.07 for the biggest drop in the S&P 500 after an analyst downgraded the company on product- reliability concerns.

Solar Panels

Solar panels produced between October 2008 and June 2009 may have loose core plates on the back, which would affect wiring and increase the risk of electric shocks and fires, Mark Bachman, an analyst at Avian Securities Inc. in Boston, said today in an interview. Bachman downgraded the shares to the equivalent of sell from buy and removed his 12-month price target.

Avon Products (AVP) Inc. climbed 7.2 percent to $17.39. The door- to-door cosmetics seller said Andrea Jung will step down as executive chairman at the end of the year and will be replaced by Fred Hassan, currently lead independent director. Avon said in December that Jung would relinquish the chief executive officer position amid slumping earnings and a foreign-bribery investigation. Avon rebuffed a takeover offer from Coty Inc. earlier this year.

Hedge Funds

For the first time this year, hedge funds are turning away from a rally in the global stock market. The ratio of bullish to bearish bets among professional speculators fell last week and is below historical averages, according to a survey by International Strategy & Investment Group. The reduction came as the MSCI All-Country World Index (MXWD) extended its yearly advance to 12 percent and contrasts with January, when managers bought shares as they rose, data compiled by ISI and Bloomberg show.

Investors’ attention will turn to corporate profits next week when Alcoa Inc. (AA) marks the unofficial start of the earnings season on Oct. 9, the fifth anniversary of the record highs in the S&P 500 and Dow. An unbroken streak of S&P 500 profit growth that spurred the market’s three-year rebound is forecast to end, with analysts projecting a 1.7 percent decline in earnings. The growth would last another quarter if not for energy companies, whose profits are poised to slump the most since 2009.

Income at oil and gas producers will fall 22 percent in the three months ending in September, the largest decline since 2009, according to more than 1,200 analyst estimates compiled by Bloomberg. Excluding the retreat, earnings in the benchmark gauge for U.S. stocks would climb 1.9 percent, the 12th straight increase, amid gains for banks and computer makers, data show.

To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

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

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