S&P 500 fluctuates as investors weigh overseas crises, jobs data
The S&P 500 fell 0.1% to 1,928.07 in New York, after tumbling 0.7% earlier in the day
New York: The Standard & Poor’s 500 Index fluctuated, after paring an earlier decline, as concerns over Argentina and Portugal offset data that signalled the Federal Reserve may have leeway to keep rates low.
LinkedIn Corp. jumped 11% after projecting revenue that beat forecasts. Procter & Gamble Co. increased 3.5% as profit topped estimates amid cost reductions. JPMorgan Chase & Co. and Morgan Stanley slumped more than 2% as banks tumbled after a ruling that Argentina’s default will trigger settlement of $1 billion of credit-default swaps.
The S&P 500 fell 0.1% to 1,928.07 at 3:36 pm in New York, after tumbling 0.7% earlier in the day. The index plunged 2% on Thursday, and is poised for a 2.6% drop for the week. The Dow Jones Industrial Average declined 39.62 points, or 0.2%, to 16,523.68, after erasing its gains for the year on Thursday. Trading in S&P 500 companies was 24% above the 30-day average for this time of day.
The US stocks joined a global sell-off on Thursday, sending the S&P 500 to its first monthly decline since January, after companies from Exxon Mobil Corp. to Samsung Electronics Co. reported results that disappointed investors, Argentina defaulted and Banco Espirito Santo SA was ordered to raise capital.
Banco Espirito Santo shares were suspended on Friday by Portugal’s securities regulator after they dropped as much as 50% in Lisbon. Global financial markets were roiled last month after another holding company in the group missed payments on commercial paper.
Argentina’s failure to pay interest on its bonds is a credit event that will trigger settlement of $1 billion of default insurance, according to the International Swaps & Derivatives Association. Argentina is the first nation to trigger default swaps since Greece restructured its debt in 2012.
10%
The S&P 500, which is up 4.3% this year, has gone without a 10% correction since 2011. The benchmark index is down 3% from a record of 1,987.98 reached on 24 July. It trades at 17.5 times the reported earnings of its companies, near the highest level since 2010.
Market volatility is rising after the S&P 500 ended its longest stretch of calm since 1995. The index has posted gains or losses of more than 1% three times in the past two weeks, compared with none during the 62 days through 16 July, data compiled by Bloomberg show.
The Chicago Board Options Exchange Volatility Index, known as the VIX, fell 0.3% on Friday to 16.90. The gauge surged 27% on Thursday to the highest level since 11 April. The volatility measure fell to the lowest since 2007 on 3 July.
Jobs Data
Stocks fluctuated earlier in the day as data showed employers in the US added more than 200,000 jobs for a sixth straight month in July, the longest such period since 1997. The 209,000 advance fell short of the 230,000 increase forecast by economists.
The jobless rate climbed to 6.2% from 6.1% in June as more people entered the labour force. Wages and hours were unchanged from June.
Pacific Investment Management Co.’s Bill Gross said the Federal Reserve will remain accommodative with wage growth in the US unchanged.
“Wages are not raging," Gross, manager of the world’s biggest bond fund, said during a radio interview on Bloomberg Surveillance with Tom Keene. “American wages on Main Street are Janet Yellen’s number one concern."
Interest Rates
Concern has grown that the improving economy may force the Fed to raise interest rates sooner than expected. Data earlier this week showed the US gross domestic product expanded at a 4% annual pace in the second quarter, confirming the Fed’s view that a first-quarter contraction was transitory.
Manufacturing expanded in July at the fastest pace in more than three years, data on Friday showed, signalling the US factories will help power the economy after a second-quarter rebound. The Thomson Reuters/University of Michigan’s final sentiment index for July fell to 81.8 from 82.5 in June.
The Fed this week cut its monthly bond buying to $25 billion in its sixth consecutive $10 billion reduction. The Fed’s Open Market Committee reiterated that it’s likely to reduce bond buying in further measured steps and to keep interest rates low for a considerable time after ending purchases. The central bank said slack in the labor market persists even though the economy is picking up.
Move Forward
Fed Bank of Dallas president Richard Fisher said he believes the timing has moved up for the first main interest rate increase from close to zero because of a strengthening economy and higher inflation.
“It would seem to me and I have been arguing this that the date of so-called liftoff has been moved forward," Fisher said on Friday in a CNBC interview. “I believe personally we have moved that forward significantly, possibly as soon as sometime early next year," he said.
Chevron Corp. and Procter & Gamble are among six S&P 500 members that reported earnings on Friday. Some 76% of the 373 companies that have released results this season have beaten analysts’ estimates for profit, while 65% have exceeded sales projections.
Five out of the S&P 500’s 10 main industries dropped as phone and financial shares slumped the most, losing more than 0.5%. Consumer-staples companies rallied 1.1%.
P&G, LinkedIn
P&G jumped 3.5% for the biggest advance in the Dow. Fourth-quarter profit beat analysts’ estimates, helped by cost reductions and an increase in razor prices. A.G. Lafley, who returned as P&G’s chief executive officer last year, has focused on cutting costs and regaining customers in areas such as detergents and beauty.
LinkedIn rallied 11%. The company gave a third- quarter sales forecast that topped estimates as the largest professional-networking website rolled out new products to reignite growth.
Expedia Inc. advanced 5.9% for the largest increase in the S&P 500. The provider of online travel services reported second-quarter profit of $1.03 per share, more than the average estimate of 76 cents in a Bloomberg survey. Revenue of $1.49 billion also beat projections.
GoPro Inc. slumped 12%. The camera maker which sold about $1 billion last year in equipment to surfers, skiers and sky divers reported a net loss of $19.8 million for the second quarter, almost four times bigger than its $5.1 million loss in the year-earlier period. Bloomberg
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