U.S. Stocks Fall as Payrolls Rise Less Than Estimated
U.S. stocks fell, capping the biggest weekly decline of the year for the Standard & Poor’s 500 Index, after data showed the nation added less than half the number of jobs economists forecast in March.
American Express Co. and Coca-Cola Co. slid at least 1.1 percent to pace losses among the largest companies. F5 Networks (FFIV) Inc. lost 19 percent, leading declines among technology shares, after reporting preliminary results below its forecast. Cisco Systems Inc. and Juniper Networks Inc., makers of communications equipment, fell more than 2 percent. Hewlett-Packard Co. fell 1.5 percent after announcing a shakeup of its board.
The S&P 500 retreated 0.4 percent to 1,553.28 in New York, paring an earlier decline of as much as 1.3 percent. The equity benchmark lost 1 percent for the week. The Dow Jones Industrial Average (INDU) fell 40.86 points, or 0.3 percent, to 14,565.25 today. Trading among S&P 500 shares was 1.2 percent higher than the three-month average. About 6.4 billion shares changed hands on U.S. exchanges, in line with the three-month average.
“The number is disappointing and moderately concerning, but one month does not make a trend,” David Roda, the Miami-based regional chief investment officer for Wells Fargo Private Bank, said in a phone interview. His firm manages $170 billion. “Yes, it’s a miss and it’s worth focusing on, but we don’t think it changes our forecast for a modest improvement in employment this year. It’s a good day to buy stocks because it made the markets nervous.”
Payrolls grew by 88,000 workers last month, the smallest in nine months, after a revised 268,000 gain in February that was higher than first estimated, Labor Department figures showed today in Washington. The median forecast of 87 economists surveyed by Bloomberg projected an advance of 190,000. The jobless rate fell to 7.6 percent from 7.7 percent.
“It obviously means that the Fed will remain on vigil with regards to the highly accommodative monetary policy,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which oversees $55 billion, said in a telephone interview.
The bull market in U.S. equities entered its fifth year last month. The S&P 500 has surged 130 percent from a 12-year low in 2009 as companies reported better-than-estimated earnings and the Federal Reserve embarked on three rounds of bond purchases to stimulate the economy. The S&P 500 and the Dow closed at record highs on April 2.
The Fed has said it will continue its purchases of $85 billion a month of Treasuries and mortgage-backed securities until the jobs outlook has “improved substantially.” Fed Chairman Ben S. Bernanke on March 20 said further gains are needed for the central bank to consider reducing its record monetary easing.
Equities climbed yesterday after the Bank of Japan strengthened its stimulus program, while European Central Bank President Mario Draghi signaled the bank will keep monetary policy loose for an extended period.
Alcoa Inc. unofficially kicks off the first-quarter earnings season on April 8 when it reports its financial results after equity markets close.
Earnings at S&P 500 companies decreased 1.8 percent in the first three months of the year, according to analyst estimates compiled by Bloomberg. That would mark the first year-over-year decrease in profit since 2009. Energy company earnings fell the most with a drop of 6.3 percent, the estimates show, as oil traded at an average of $94.36 a barrel during the period compared with $103.03 in the first quarter of 2012. Profit at technology companies declined 4.1 percent for the second-biggest drop, the data show.
Seven out of 10 groups in the S&P 500 (SPX) fell today, with technology, health-care and consumer-staples companies losing at least 0.6 percent. The Morgan Stanley Cyclical Index slid 0.6 percent, extending its decline for the week to 3.3 percent. Among the largest companies, Coca-Cola declined 1.1 percent to $40.08 and American Express tumbled 2.1 percent to $65.30.
The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against losses in stocks, added 0.2 percent to 13.92 after jumping as much as 13 percent earlier in the day. The gauge, known as the VIX (VIX), is down 23 percent for the year.
F5 Networks plunged 19 percent to $73.21 after the maker of equipment for managing data traffic said preliminary second-quarter revenue was $350.2 million, below its forecast of $370 million to $380 million, as North American sales slowed.
Cisco, the world’s largest maker of networking equipment, declined 2 percent to $20.61 and Juniper Networks, the second-biggest, slid 3.2 percent to $17.55.
Hewlett-Packard fell 1.5 percent to $21.97 after announcing Ray Lane is stepping down as chairman. Two other directors are also leaving the company in its second board overhaul in two years, underscoring shareholders’ dissatisfaction with the company’s performance and the botched acquisition of Autonomy Corp.
The Bloomberg U.S. Airlines Index slid 0.7 percent after a JPMorgan Chase & Co. analyst said U.S. government spending on air travel probably fell as much as 30 percent in the past month amid congressionally mandated budget cuts that threaten to keep weighing on the industry.
Delta Air Lines Inc. fell 2.4 percent to $14.39, bringing its loss for the week to 13 percent, the most since May 2011.
Rigel Pharmaceuticals Inc., a drugmaker with no products on the market, plunged 40 percent to $4.50 after its experimental rheumatoid arthritis medicine being developed with AstraZeneca Plc showed mixed results in a trial.
Hanesbrands Inc. rose 3.8 percent to $46.84 after the apparel maker said it will pay a quarterly dividend of 20 cents a share in June, the first time it has made a payout to shareholders.
NII Holdings Inc., which offers mobile-phone service under the Nextel brand in Latin America, rose 21 percent to $5.48 after agreeing to sell its Peru unit for $400 million.
The move by the Bank of Japan this week to embark on record easing means the world’s four biggest developed-market monetary authorities -- the BOJ, the Fed, the ECB and the Bank of England -- are aligned in their commitments to spur growth and return their economies to full strength.
Increased stimulus may bolster a global economy forecast by the World Bank in January to expand 2.4 percent this year, down from a previous projection of 3 percent. At the same time, the level of intervention carries the threat of inflation and asset bubbles as well as tension with emerging markets including China, Brazil and South Korea over exchange rates and capital inflows.
“This is unprecedented on many levels,” said Pippa Malmgren, president and founder of Principalis Asset Management LLP in London and a former financial-market adviser to President George W. Bush. “Not only do you have the most in terms of size of economy or number of central banks, but the effort is a record effort. We’ve never seen such unconventional methods used to create as much inflation as possible.”
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