The Herald Bulletin

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September 6, 2013

Weak jobs report, Syria tensions whipsaw markets

NEW YORK —

The stock market lurched between gains and losses Friday as traders held out hope for more economic stimulus from the Federal Reserve and worried about escalating tensions between the U.S. and Syria.

Stocks opened slightly higher after a weak jobs report for August bolstered hopes that the Fed may wait to cut back on its bond-buying program.

But the market soon fell as traders worried about a standoff in Syria. Russian media reported that naval ships were en route to the country, raising worries of a wider conflict and sending the Dow Jones industrial average down as much 148 points in the first half-hour of trading.

By 12:05 p.m. Eastern Daylight Time, the Dow had recovered and was up 40 points at 14,977. The Standard & Poor's 500 index rose six points to 1,661 and the Nasdaq composite was up 8 points to 3,667.

Traders moved money back into U.S. government bonds on speculation that the weak employment numbers would encourage the Federal Reserve to keep buying bonds. The yield on the 10-year Treasury note fell to 2.91 percent from 3 percent the day before, a big move for the bond market.

Wall Street was rattled by signs that the confrontation between the U.S. and Syria over Syria's alleged use of chemical weapons on civilians was getting worse. Three Russian naval ships were sailing toward Syria in the eastern Mediterranean on Friday and a fourth was on its way, the Interfax news agency reported, a sign that Russia may assist Syria in case the U.S. does strike. However, Russia President Vladimir Putin's chief of staff said the naval ships were there to help Russia evacuate its citizens if strikes become necessary.

"These are troubling developments," said David Chalupnik, head of equities for Nuveen Asset Management. "Syria is turning into something bigger that what it started out to be."

The price of crude oil rose as traders anticipated that any escalation of tensions in the Middle East might disrupt the flow of oil from the region. Oil rose $1.81 to $110.16 a barrel. Gold rose $13 to $1,386 an ounce as investors parked money in safe-play assets.

In Washington, the Labor Department reported that U.S. employers added 169,000 jobs last month, fewer than the 177,000 economists had forecast. It also revised downward the number of jobs added in July to 104,000, from its previous estimate of 162,000.

"This was a horrible set of jobs figures, starting with large revision to last month's number," Tom di Galoma, head of fixed-income rates sales at ED&F Man Capital, wrote in an email to clients.

Friday's jobs survey is the last major piece of economic data the Federal Reserve will have to consider before its September 17-18 policy meeting, when it will decide the fate of its large bond-buying program.

The Fed has been buying $85 billion in Treasurys and other bonds since last September in an effort to keep interest rates low and encourage hiring and economic growth. It was widely believed that the Fed would start pulling back on the purchases this month, barring a disappointing jobs report.

In corporate news, Mattress Firm sank after the company reported second-quarter earnings of 43 cents a share, far below the 51 cents analysts expected, according to FactSet. Mattress Firm plunged $6.78, or 16.3 percent, to $34.91.

VeriFone Systems reported a third quarter loss on Thursday, but the results still came in above Wall Street expectations. The electronic payment terminal maker jumped $2.22, or 11 percent, to $22.94.

 

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