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.
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.”
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.