U.S. stocks fell, after the Standard & Poor’s 500 Index rose the most in almost two weeks, as a private jobs report showed companies added fewer jobs than forecast and the government shutdown entered a second day.
BlackBerry Ltd. slid 4% after the smartphone maker said the cost to cut staff as it tries to sell itself will be four times its original forecast. Alcoa Inc. slumped 2% after Deutsche Bank AG lowered its rating on the aluminum producer. Global Payments Inc. rallied 11% after boosting its earnings forecast.
The S&P 500 lost 0.6% to 1,684.35 at 11:05 a.m. in New York. The Dow Jones Industrial Average fell 111.06 points, or 0.7%, to 15,080.64. Trading in S&P 500 stocks was 4.9% above the 30-day average at this time of day.
“People thought there would be a deal struck in fairly short order and that is obviously not occurring,” Matthew Kaufler, a portfolio manager at Federated Investors Inc. in Rochester, New York, said by phone. His firm oversees $363.8 billion. “You not only have the current impasse, but you have the debt ceiling issue that is looming as well. In the short term, we are in for a choppy market.”
The benchmark gauge for U.S. equities climbed 0.8% yesterday, as investors speculated any economic effects from the first partial shutdown of the U.S. government since 1996 would be limited. The index rallied 4.7% in the third quarter and is 19% higher in 2013.
Equities plunged today after the first day of the federal work stoppage ended with no talks scheduled between the White House and Congress, making it more likely the standoff would merge with the fight over raising the U.S. debt limit.
A partial shutdown lasting one week would probably shave 0.1 percentage point from economic growth, according to the median estimate of economists, with the costs accelerating if the closing persists.
“The impact on the broader economy does start to kick in as the shutdown extends beyond a week, two weeks,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, whose estimate matched the survey median. “If it’s a couple of days or even a week it’s something that we’ll have forgotten about a month or two from now.”
The U.S. has begun final steps to avoid breaching the debt limit, Treasury Secretary Jacob J. Lew said, urging Congress to raise the borrowing authority “immediately” in a letter addressed to House Speaker John Boehner. Lew repeated that the measures will be exhausted no later than Oct. 17.
A report today showed companies added fewer workers than projected in September, indicating the U.S. job market is struggling to gain momentum. The 166,000 increase in employment followed a revised 159,000 rise in August that was smaller than initially estimated, according to the ADP Research Institute in Roseland, New Jersey. The median forecast of 40 economists surveyed by Bloomberg called for an advance of 180,000.
Investors have been scrutinizing economic reports to gauge whether growth is robust enough for the Federal Reserve to begin curtailing stimulus at its next meeting this month. The Labor Department won’t release its monthly jobs report on Friday if the government remains closed.
The Chicago Board Options Exchange Volatility Index, or VIX, rose 6.4% to 16.54 today, reversing a 6.4% drop yesterday. The equity volatility gauge is down 8.2% this year.
All 10 main S&P 500 groups retreated at least 0.2% today, after each industry rallied more than 0.3% yesterday. Industrial companies and producers of consumer staples tumbled at least 0.8% to pace today’s declines.
BlackBerry slid 4% to $7.60, the lowest in 11 months. The company expects to record about $400 million in restructuring charges, four times the amount it originally projected, as it cuts staff by 40% and sells off equipment and real estate.
Alcoa slumped 2% to $8.01. Deutsche Bank reduced its recommendation to sell from hold, citing the outlook for lower aluminum prices. Shares of the company could fall 33% to as low as $5.50 in the next year, according to the firm, which also said Alcoa should consider spinning off its primary metals business.
Monsanto Co. fell 1.2% to $103.83. The company reported a fourth-quarter loss that was wider than anticipated and said earnings for the year that began Sept. 1 will be no more than $5.20 a share excluding acquisition costs. Analysts estimated profit of $5.34 on average. Monsanto also agreed to buy farm-data company The Climate Corp. for $930 million.
Tesla Motors Inc. dropped 1.5% to $190.15. The shares were cut to neutral from outperform by Robert W. Baird & Co. analyst Ben Kallo, who cited possible “execution risk” related to production milestones for Model S electric cars.
Global Payments climbed 11% to $56.21, headed for a record close. The bank-card processor forecast cash earnings in 2014 will be as much as $4.05 a share after earlier predicting profit will be no more than $4. The Atlanta-based company also reported first-quarter cash earnings were $1 a share, exceeding the 94-cent profit estimated by analysts on average.