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

Apple lost 2.2 percent, helping to reverse an early advance among technology shares. Bank of America Corp. (BAC)dropped 1.3 percent after surging as much as 2.6 percent.Zynga Inc. (ZNGA) slid 13 percent after cutting its forecast for full-year bookings. Avon Products (AVP) Inc. climbed 6.9 percent as the door-to-door cosmetics seller said Andrea Jungwill step down as executive chairman.

The Standard & Poor’s 500 Index fell 0.3 percent to 1,457.68 at 3:42 p.m. in New York, after climbing as much as 0.7 percent earlier. The equity benchmark has increased 1.3 percent this week as U.S. economic reports topped estimates. The Dow Jones Industrial Average added 2.92 points, or less than 0.1 percent, to 13,578.28 today. Trading in S&P 500 companies was 149 percent above the 30-day average at this time of day.

“After an initial bump up this morning, there hasn’t been sustained buying to hang on to the gains,” 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. “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.”

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.”

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.

Apple, (AAPL) the world’s largest company by market value, dropped 2.2 percent to $652.06, 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 Tumble

Banks reversed an early rally. Bank of America dropped 1.3 percent to $9.29. Goldman Sachs Group Inc. (GS) slid 1 percent to $118.75. Citigroup Inc. (C) erased 0.9 percent to $34.66.

Zynga plunged 13 percent to $2.45 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 4.5 percent to $20.95. 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 $20.05 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 Inc. climbed 6.9 percent to $17.34. 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.

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