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U.S. stocks fluctuate after selloff amid jobs, factory reports

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(Bloomberg) — U.S. equities fluctuated, after erasing early declines, as data showed the economy added fewer jobs than forecast without stoking wage inflation and manufacturing expanded in July.

LinkedIn Corp. jumped 11 percent after projecting revenue that beat analysts’ estimates. Procter & Gamble Co. increased 3.6 percent as the world’s largest consumer-products maker reported profit that topped estimates amid cost reductions. GoPro Inc. slid 9.6 percent after reporting a wider quarterly loss than a year earlier.

The Standard & Poor’s 500 Index rose 0.2 percent to 1,934.41 at 10:09 a.m. in New York, after tumbling 2 percent yesterday. S&P 500 futures dropped as much as 0.7 percent earlier today. The Dow Jones Industrial Average declined 8.07 points, or less than 0.1 percent, to 16,555.23, after erasing its gains for the year yesterday.

“It was in line and it didn’t give the market any reason to sell off any further,” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said in a phone interview. “No new scare was given in terms of the wage component. It was enough for the moment to not make it worse for the market.”

Employers in the U.S. added more than 200,000 jobs for a sixth straight month in July, the longest such period since 1997. The 209,000 advance fell short of the 230,000 increase forecast by economists.

The jobless rate climbed to 6.2 percent from 6.1 percent in June as more people entered the labor force. Wages and hours were unchanged from June.

Interest Rates

Pacific Investment Management Co.’s Bill Gross said the Federal Reserve will remain accommodative with wage growth in the U.S. unchanged.

Wages “are not raging,” Gross, manager of the world’s biggest bond fund, said during a radio interview on “Bloomberg Surveillance” with Tom Keene. “American wages on Main Street are Janet Yellen’s number one concern.”

Concern has grown that the improving economy may force the Fed to raise interest rates sooner than expected. Data earlier this week showed U.S. gross domestic product expanded at a 4 percent annual pace in the second quarter, confirming the Fed’s view that a first-quarter contraction was transitory.

Manufacturing expanded in July at the fastest pace in more than three years, showing U.S. factories will help power the economy after a second-quarter rebound. The Institute for Supply Management’s index increased to 57.1, the highest since April 2011, from 55.3 a month earlier, the Tempe, Arizona-based group’s report showed today.

Readings above 50 indicate growth. The median forecast in a Bloomberg survey of economists was 56.

Consumer Sentiment

The Thomson Reuters/University of Michigan’s final sentiment index for July fell to 81.8 from 82.5 in June. Economists surveyed by Bloomberg projected a drop to 81.8. The group’s preliminary July reading issued last month was 81.3.

The Fed this week cut its monthly bond buying to $25 billion in its sixth consecutive $10 billion reduction. The Fed’s Open Market Committee reiterated that it’s likely to reduce bond buying in “further measured steps” and to keep interest rates low for a “considerable time” after ending purchases. The central bank said slack in the labor market persists even though the economy is picking up.

U.S. stocks joined a global selloff yesterday, erasing the year’s gains in the Dow, as Exxon Mobil Corp. to Micron Technology Inc. tumbled amid weaker corporate results.

Global Turmoil

Equities have been weighed down this week by global turmoil as Argentina missed a deadline to pay $539 million in interest after failing to produce an agreement with creditors from its last default in 2001, and amid rising tensions in the Gaza Strip. In addition, Portugal’s Banco Espirito Santo said it needs to raise capital after a first-half loss. And companies from Adidas AG to Lufthansa AG said unrest in Russia and Ukraine dimmed prospects for growth.

The S&P 500, which is up 4.7 percent this year, has gone without a 10 percent correction since 2011. The benchmark index is down 2.9 percent from a record of 1,987.98 reached on July 24. It trades at 17.6 times the reported earnings of its companies, near the highest level since 2010.

Market volatility is rising after the S&P 500 ended its longest stretch of calm since 1995. The index has posted gains or losses of more than 1 percent three times in the past two weeks, compared with none during the 62 days through July 16, data compiled by Bloomberg show.

Chevron Corp. and Procter & Gamble Co. are among six S&P 500 members to report earnings today. Some 76 percent of the 373 companies that have released results this season have beaten analysts’ estimates for profit, while 65 percent have exceeded sales projections.

–With assistance from Jonathan Morgan in Frankfurt.


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