U.S. Stocks Little Changed Amid Caution Following Quarterly Rout

  • Investors cautious ahead of September employment report
  • Raw-material, health-care shares rise for second day

U.S. stocks closed little changed as investors were circumspect before the government’s jobs data, a key input into the Federal Reserve’s thinking on interest rates.

Equities struggled for momentum following the worst quarter since 2011. A late-day surge led by raw-material and health-care shares helped erase losses of at least 1 percent in both the Standard & Poor’s 500 Index and Nasdaq Composite Index. The S&P 500 advanced in a third straight session for just the second time since July.

The S&P 500 rose 0.2 percent at 1,923.82 at 4 p.m. in New York, after jumping 1.9 percent Wednesday. The Dow Jones Industrial Average declined 12.69 points, or 0.1 percent, to 16,272.01. The Nasdaq Composite added 0.2 percent, while the Russell 2000 Index slipped 0.3 percent. About 7.5 billion shares traded hands on U.S. exchanges, 3.3 percent above the three-month average.

“After this big rally we had yesterday, I think people want to sit and see what happens,” said Matt Maley, an equity strategist at Miller Tabak & Co LLC in New York. “We’ve got the employment number tomorrow. The bottoms following those bad Septembers usually come in October. People are going to sit on the sidelines a little bit longer until they get some more clarification.”

Concerns about a slowdown in China, along with mixed messages on the Fed’s rate policy, sent the S&P 500 to consecutive monthly declines and boosted market turbulence. Data today showed China’s official factory gauge held near a three-year low as government stimulus measures showed signs of steadying the weakness in manufacturing.

Fed officials, including Chair Janet Yellen, have suggested that the U.S. economy is sturdy enough to handle higher rates this year, despite their hesitation to raise borrowing costs last month amid global market turmoil and weakness in China. Traders are pricing in about a 45 percent chance that the Fed will raise rates this year, and 52 percent odds on a January increase.

U.S. data today showed manufacturing barely grew in September as a stronger dollar and faltering overseas markets led to the slowest pace of orders since November 2012. A separate report today showed the number of Americans filing applications for unemployment benefits rose last week, maintaining a pattern of gains and losses around decade lows that signals firings remain muted.

Tomorrow’s Labor Department report is expected to show the economy added 200,000 jobs in September with the unemployment rate holding at 5.1 percent, according to economists surveyed by Bloomberg. This will be the last jobs report before the Fed makes its next rate decision on Oct. 28.

Data Watch

The central bank is also weighing whether recent financial-market turmoil has abated enough to warrant tightening. The Chicago Board Options Exchange Volatility Index has closed above 20 for the past 29 sessions, the longest streak since January 2012. The measure of market turbulence known as the VIX fell 8 percent Thursday to 22.55. The S&P 500 is down 9.7 percent from its record set in May, and came within five points Tuesday of its 2015 closing low reached in August.

While the gauge is 2.9 percent above its worst closing level of this year, almost 35 percent of the index’s members have slipped back below their Aug. 25 price. The heavyweights are doing all the lifting: Apple Inc., Microsoft Corp. and Exxon Mobil Corp., the three largest companies by market cap, account for nearly one-fifth of gains since the market bottomed after a four-day selloff of 10 percent.

Two of those megacaps -- Apple and Exxon Mobil -- were a drag today, falling at least 0.4 percent. Winners and losers were evenly split among the S&P 500’s 10 main industries. Raw materials climbed 1.1 percent. Utilities fell the most, 1.2 percent, after the group was the only one to rise in the third quarter with a 4.4 percent gain.

“We need to see fewer companies hit new lows, and more companies hit new highs,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird & Co., which oversees $110 billion. “Once that starts happening, we can feel confident that the new lows are in place. Without it, it looks suspect.”

Materials Rally

Beaten-down raw-material shares in the S&P 500 rose for a second day, after tumbling 17 percent last quarter. Vulcan Materials Co. and Martin Marietta Materials Inc., two of only 28 material stocks to advance last quarter, gained at least 3.1 percent today. Paint maker Sherwin-Williams Co. added 4.1 percent on the way to its best two-day gain since November 2012.

The Nasdaq Biotechnology Index erased an earlier 1.1 percent drop to climb 0.9 percent. Celgene Corp. rallied 4.3 percent after JPMorgan Chase & Co. raised its rating to overweight from neutral. Mylan NV and Vertex Pharmaceuticals Inc. added at least 2.8 percent.

Semiconductors, one of the leaders yesterday, reversed course to pace declines today among technology companies. Qorvo Inc. and Nvidia Corp. lost more than 1.9 percent, after rising at least 3 percent Wednesday. Texas Instruments Inc. fell 2.2 percent, the most in three weeks.

Among companies moving on corporate news, Joy Global Inc. slumped 4.1 percent on its way to an 11-year low. The mining equipment maker is being replaced in the S&P 500 by Verisk Analytics Inc., a provider of data to insurers and banks, which rose 5.8 percent. Joy Global is the second-worst performer in the benchmark this year, down 69 percent. Consol Energy Inc., the worst performer, is down 6.7 percent today to extend its 2015 slide to 73 percent.

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