U.S. stocks slumped as August payrolls data gave little comfort to investors seeking direction on interest rates amid volatile global markets and growing concern about the economy’s strength.
The Standard & Poor’s 500 Index lost 1.5 percent to 1,921.22 at 4 p.m. in New York. The benchmark index slid 3.4 percent for the week, its second-worst performance since December.
The Dow Jones Industrial Average fell 272.38 points, or 1.7 percent, to 16,102.38. Equity markets will be closed Monday for Labor Day. Trading on U.S. exchanges was 10 percent below the three-month average.
It’s “a glass-half-empty kind of day,” said Patrick Blais, a fund manager at Manulife Asset Management Ltd. in Toronto. He helps manage about C$280 billion at the firm. “Right now there’s a lot of nervousness so it’s natural for the market to react aggressively.”
In the U.S. stock market, the S&P 500 had its sixth decline exceeding 1 percent in 12 days. Prior to that there’d been 10 such declines since January. The benchmark gauge has moved up or down by an average of more than 2 percent a day since falling out of its 2015 trading range on Aug. 20 -- almost four times as much as in the prior nine months.
September is historically the worst month of the year for the S&P 500, with the equity gauge falling 1.1 percent on average based on data going back to 1927, according to data compiled by Bloomberg.
“There’s a risk-off mentality rather than a risk-on one going into a three-day weekend for the U.S. and after the Chinese markets have been closed for four days,” Mark Spellman, a fund manager who helps oversee $4.2 billion at Alpine Funds in Purchase, New York, said by phone. “The weakness in the market is due primarily to continued global growth concerns.”
Financial markets have been unable to shake off volatility that’s jolted markets amid concern China’s slowdown will spread. The Dow yesterday erased a rally of nearly 200 points as optimism over the European Central Bank’s revamp of quantitative easing faded. The gauge surged 1.8 percent Wednesday after tumbling 2.8 percent the day before.
Research from a JPMorgan Chase & Co. strategist this week argued that robotic selling by quantitative investment funds tuned to volatility and price trends -- which contributed to last month’s losses in U.S. stocks -- is only about halfway completed. Marko Kolanovic said such traders probably have to get rid of another $100 billion in stocks in the next one to three weeks.
Data today showed U.S. employers added 173,000 workers in August and the jobless rate dropped to 5.1 percent. The gain in payrolls, while less than forecast, followed advances in July and June that were stronger than previously reported. The unemployment rate is the lowest since April 2008. Average hourly earnings climbed more than forecast and workers put in a longer workweek, the report also showed.
The jobs report is the last major data point before the Fed meets later this month on Sept. 16-17 to discuss the timing of its first increase in interest rates in nearly a decade. Investors raised bets on a September liftoff to 30 percent from 26 percent before the jobs data, while that’s still less than the 48 percent odds predicted before China devalued the yuan on Aug. 11.
“This is the first time the market has looked at a Fed meeting and really has no idea what the Fed is going to do,” said Mark Kepner, an equity trader at Themis Trading LLC in Chatham, New Jersey. “Right now you’re looking at the overall uncertainty and that’s what’s hanging on the market. I don’t think this number in and of itself changes how somebody’s going to vote.”
Fed Bank of Richmond President Jeffrey Lacker said the central bank should end the era of record-low interest rates, now that the impacts from winter weather and energy prices have passed. He said labor-market slack has been reduced to pre- recession levels, and shorter-term inflation measures are tracking the U.S. central bank’s 2 percent target.
“It’s time to align our monetary policy with the significant progress we have made,” Lacker said in the text of a speech in Richmond.
The Chicago Board Options Exchange Volatility Index rose 8.6 percent to 27.80. The gauge of market turbulence known as the VIX is up 6.7 percent for the week, after posting a record 135 percent jump in August.
All 10 major industries in the S&P 500 fell more than 1.1 percent, with financial and raw-material shares dropping at least 1.9 percent. Goldman Sachs Group Inc. and JPMorgan Chase & Co. lost more than 1.9 percent to lead declines among the largest banks.
Netflix Inc. slid for the sixth consecutive day, losing 2.3 percent. The stock is down 16 percent since Aug. 27, after more than doubling from the beginning of the year.
Freeport-McMoRan Inc. tumbled 4.2 percent as copper dropped that most in eight weeks after Germany factory orders fell more than expected in July.
Caterpillar Inc. lost 1.8 percent after the stock was downgraded to neutral from outperform at Robert Baird by equity analyst Mircea Dobre. Joy Global Inc. fell 1.4 percent, a day after it plunged the most in six years after cutting its 2015 outlook amid the global commodity downturn.
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