A better-than-expected jobs report helped bolster investors’ confidence in the American economy, tempering losses in the busiest trading week in six months for U.S. equities.
The Standard & Poor’s 500 Index (SPX) pared its second straight weekly decline to 0.8 percent, rallying 1.1 percent on the final day. The Russell 2000 Index (RTY) cut its loss for the five days to 1.3 percent, after dropping 10 percent below a record reached in March. An average 7.2 billion shares changed hands daily on U.S. exchanges, the highest since April. The Stoxx Europe 600 Index (MXAP) tumbled 2.1 percent as European Central Bank stimulus plans disappointed investors.
“The market continues to climb the proverbial wall of worry even as it got a little taller this week,” Rob Lutts, the Salem, Massachusetts-based
chief investment officer of Cabot Money Management Inc., said by phone. “We learned this week that the psychology of investors is fairly fragile, and maybe that’s good because the markets die on extreme optimism.”
Stocks tumbled early in the week amid concerns over economic weakness in Europe and geopolitical turmoil as the Federal Reserve is on course to end its bond-buying program this month. Investors have been concerned the central bank may raise interest rates sooner than anticipated as the U.S. economy gains strength.
Russell Correction
The Russell 2000 closed on Oct. 1 down 10 percent from a all-time high reached March 4, the common definition of a correction. The S&P 500 fell below its average price for the past 100 days during the week, the first time since Aug. 8.Equities rallied on the final day, sending the S&P 500 to within seven points of its 50-day moving average, as data showed renewed vigor in the U.S. labor market. The unemployment rate dropped to a six-year low of 5.9 percent in September as employers added 248,000 to payrolls, indicating corporations are gaining confidence the expansion in the world’s biggest economy will be sustained, surviving slowdowns in Europe and Asia.
Investors will receive more clues on the economy’s strength in the coming week as Alcoa Inc. unofficially kicks off the third-quarter reporting season on Oct. 8. Profit at companies in the S&P 500 rose 4.9 percent in the July-September period, according to the average estimate of economists in a Bloomberg survey.
“The U.S. is more self-sustained on a firmer footing as investors have also been concerned about the absence of growth in Europe and geopolitical uncertainty in Russia, Ukraine and throughout the Middle East,” Eric Wiegand, a New York-based senior portfolio manager at U.S. Bank Wealth Management, which oversees $120 billion, said by phone.
Europe Tumbles
Equities worldwide declined. The MSCI All-Country World Index tumbled 2 percent, touching the lowest level in more than five months.The Stoxx 600 had its worst week since Aug. 8, despite a 1 percent rally on the final day. The gauge plunged the most in 15 months on Oct. 2 amid concern stimulus efforts won’t be enough to revive the region’s economy. ECB President Mario Draghi detailed plans to buy assets for at least two years to boost inflation and economic growth in the euro area.
The challenges facing policy makers was spotlighted as Italy cut its growth forecast, while data showed German manufacturing shrank and euro-area factories lowered prices in September by the most in more than a year.
Asia stocks dropped for a fourth week, with the MSCI Asia Pacific Index slumping 2.8 percent, the most since March. The Topix index plunged 3.7 percent as the yen fell to a six-year low against the dollar. The MSCI Emerging Markets Index retreated 2.6 percent, its fourth week of losses for the longest losing streak since June 2013.
Speculative Stocks
Recent trading has highlighted a divergence between small-cap stocks and the broader U.S. market. The Russell 2000 tumbled 7.7 percent in the third quarter, its worst performance in three years, as investors sold speculative stocks.The S&P 500, meanwhile, added 0.6 percent last quarter, its seventh gain and longest streak since 1998. The gauge has not fallen four straight days this year, and has not slid more than 10 percent in three years. The benchmark index is up 6.5 percent this year and reached a record Sept. 18.
The Dow Jones Industrial Average fell 103.46 points, or 0.6 percent, to 17,009.69 for a second weekly decline. The technology-heavy Nasdaq 100 Index retreated 0.7 percent.
The Chicago Board Options Exchange Volatility Index slid 2 percent to 14.55. The gauge of S&P 500 options prices jumped 23 percent in the previous week, the biggest rally since Aug. 1.
Seven of the 10 main industries in the S&P 500 declined for the week, led by commodities producers and industrial companies. Utilities advanced 1.8 percent.
Oil Prices
Energy producers in the benchmark index (VIX) sank 3.8 percent as a group, as U.S. crude fell below $90 a barrel for the first time in 17 months. Nabors Industries Ltd. and Newfield Exploration Co. plunged at least 8.5 percent as all but two of the industry’s 43 members declined. Chevron Corp. tumbled 3.1 percent for the biggest drop in the Dow.Raw-materials producers retreated 3.9 percent, as the price of gold slipped below $1,200 for the first time this year. Newmont Mining Corp. lost 4.7 percent, while Freeport-McMoRan Inc. fell 1.7 percent.
Tekmira Pharmaceuticals Corp. soared 36 percent, leading makers of experimental Ebola treatments after the first case of the deadly virus was confirmed in the U.S. Sarepta Therapeutics Inc. jumped 6.4 percent, while NewLink Genetics Corp. climbed 1.3 percent.
Airlines Fluctuate
Airline stocks finished the week little changed. Major carriers retreated Oct. 1 following the Ebola report, before rallying on the last day of the week amid the jobs data. Delta Air Lines Inc. gained 1.2 percent in the period, while Southwest Airlines Co. fell 1.4 percent.Ford Motor Co. plunged 11 percent for its worst week in three years. The second-largest U.S. carmaker said it will miss a profit forecast for 2014 as weakening sales in Russia, deflation in South America and recall costs in North America reduce income.
EBay Inc. advanced 2.9 percent. The world’s biggest online marketplace rallied 7.5 percent on Sept. 30 after saying it will separate from its payments unit PayPal next year.
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