U.S. stocks fell, with the Standard & Poor’s 500 Index capping its worst monthly drop since May 2012, as investors weighed the prospects for American military action in Syria and disappointing data on consumer spending.
PulteGroup Inc. slid 3% as housing stocks retreated after a report showed consumer spending rose less than forecast in July. Krispy Kreme Doughnuts Inc. tumbled 15% after reporting second-quarter earnings that trailed analysts’ estimates as costs increased. Salesforce.com Inc jumped 13% as the provider of customer-management software announced forecasts that beat projections.
The S&P 500 dropped 0.3% to 1,632.97 at 4 p.m. in New York, extending its decline in August to 3.1%. The Dow Jones Industrial Average fell 30.64 points, or 0.2%, to 14,810.31. U.S. exchanges are closed Sept. 2 for the Labor Day holiday.
“People don’t want to go into the weekend hugely exposed up or down, especially with this fear of Syria overhanging the market,” Beth Lilly, a Minneapolis-based portfolio manager with Gabelli Funds, which oversees $40 billion, said in a phone interview. “There’s a lot of concern of if we get involved in a bombing, how protracted will our involvement be. The market does not like uncertainty, and there’s a lot of uncertainty as it relates to Syria.”
President Barack Obama told reporters that he hasn’t made a final decision on his response to the country’s alleged use of chemical weapons, and that “in no event” will it involve U.S. troops on the ground in Syria.
‘High Confidence’
The S&P 500 earlier fell as low as 0.6% as Secretary of State John Kerry spoke after the Obama administration released an assessment saying intelligence agencies have “high confidence” that Syrian forces used chemical weapons in an Aug. 21 attack.
The index pared its decline as Kerry said the U.S. is committed to “a diplomatic process” and that any response to a chemical weapons attack in Syria will be “limited and tailored.”
“It’s clear that the administration is setting the stage and laying out the justification for a limited military strike,” Jim Russell, senior equity strategist for U.S. Bank Wealth Management, said in an interview. His firm oversees $110 billion. “The key language in Kerry’s talk was that the strike would tend to be limited and confined to a smaller scope. The markets like the tone of a one-and-done or confined type of program.”
Economic Data
The S&P 500 retreated this month amid the tension in Syria and concern that the Federal Reserve will reduce its bond purchases. Minutes of the central bank’s July meeting released Aug. 21 showed policy makers supported stimulus cuts this year if the economy improves. The officials next meet Sept. 17-18.
Data today showed consumer spending in the U.S. rose less than forecast last month. The measure, which accounts for about 70% of the economy, rose 0.1%. The median forecast in a Bloomberg survey of economists called for a 0.3% gain.
A separate report indicated consumer confidence dropped in August from a six-year high as interest rates rose and tensions in the Middle East intensified. The Thomson Reuters/University of Michigan final index of consumer sentiment for this month fell to 82.1, a four-month low, from 85.1 in July.
The MNI Chicago Report business barometer rose to 53 in August from a reading of 52.3 the prior month, in line with estimates. The regional index is viewed as an indicator of business activity across the U.S.
Slow Trading
About 5 billion shares changed hands today on U.S. exchanges, 18% below the three-month average. Trading has averaged about 5.4 billion shares a day in August, the second- slowest month in at least five years, according to data Bloomberg began compiling in 2008.
The Chicago Board Options Exchange Volatility Index, or VIX, rose 1.1% to a two-month high of 16.99. The equity volatility gauge surged 26% this month, the most since May 2012.
Eight of the 10 main groups in the S&P 500 retreated today, led by declines of at least 0.5% among technology and consumer-discretionary stocks.
An S&P index of homebuilders slipped 2.1%, bringing its decline this month to 8.8% amid growing concern that rising interest rates could slow the housing recovery. PulteGroup lost 3% to $15.39 and D.R. Horton Inc. fell 3% to $17.85.
Computers, Donuts
Hewlett-Packard dropped 0.8% to $22.34. Global personal-computer shipments will decline more than previously forecast this year as consumers in emerging markets follow those in developed countries in shifting to mobile devices, research firm IDC said yesterday in a statement.
Krispy Kreme, the chain that revived itself by expanding beyond sweet treats into coffee and smoothies, tumbled 15% to $19.72. Excluding certain items, second-quarter profit was 14 cents a share. Analysts on average estimated 16 cents, according to data compiled by Bloomberg.
Salesforce.com jumped 13% to a record $49.13 for the biggest increase in the S&P 500. The company, which acquired e- mail marketing provider ExactTarget Inc. last month for $2.5 billion in its biggest deal ever, issued third-quarter sales and earnings forecasts that topped analysts’ estimates and raised guidance for the year.
Apache Corp. rallied 9% to $85.68, the biggest gain since November 2008. China Petrochemical Corp., Asia’s largest refiner, agreed to pay $3.1 billion for a 33% stake in Apache’s Egyptian oil and gas business, marking the state-owned company’s biggest purchase in the Middle East.
Debt Ceiling
Investors head into the holiday weekend watching the political wrangling over the approaching limit on federal spending. The U.S. government is expected to exhaust its ability to borrow funds in mid-October, when it will hit the statutory debt limit, according to an estimate from the Treasury Department.
“September promises to be an important month, as discussions on the U.S. debt situation resurface and as the holiday season ends,” Richard Hunter, head of equities at Hargreaves Lansdown Plc in London, wrote in an e-mail. “As investors roll up their sleeves for the last third of the year, volumes should pick up markedly from the current low levels.”
