U.S. stocks fall on consumer reports as investors watch Syria

NEW YORK – U.S. stocks fell, with the Standard & Poor’s 500 Index headed for its worst month since May 2012, as investors weighed a smaller-than-estimated gain in consumer spending and the prospects for a strike against Syria.
Hewlett-Packard Co. dropped 1.2 percent after a report predicted global personal-computer shipments will slide more than previously forecast. Krispy Kreme Doughnuts Inc. tumbled 14 percent after reporting second-quarter earnings that trailed analysts’ estimates as costs increased. Salesforce.com Inc. jumped 13 percent as the provider of customer-management software announced forecasts that beat projections.
The S&P 500 fell 0.4 percent to 1,632.20 at 10:54 a.m. in New York. The Dow Jones Industrial Average dropped 49.69 points, or 0.3 percent, to 14,791.26. Trading in S&P 500 stocks was 28 percent below the 30-day average at this time of day.
“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.”
The S&P 500 has fallen 3.2 percent in August amid concern the Federal Reserve will reduce its bond purchases and the United States may take military action against Syria. Trading has averaged about 5.5 billion shares a day, on track for the second-slowest month in at least five years. U.S. exchanges are closed Monday for the Labor Day holiday.

Declassified report

The Obama administration plans to release Friday a declassified report outlining an intelligence analysis of evidence that the Syrian government used chemical weapons in an attack, an administration official said.
Publication of the assessment follows Thursday night’s vote in the U.K.’s House of Commons rejecting British participation in a military strike against Syria. France has signaled it might act as the main U.S. ally in a response.
Growing speculation the Federal Reserve will reduce its monthly bond buying has contributed to the S&P 500’s decline from a record on Aug. 2. 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.

Spending, confidence

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Data today showed consumer spending in the U.S. rose less than forecast in July, indicating further job gains are needed to sustain household purchases. The measure, which accounts for about 70 percent of the economy, rose 0.1 percent after a revised 0.6 percent increase the prior month that was larger than previously estimated. The median forecast in a Bloomberg survey of economists called for a 0.3 percent rise.

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, which was the highest since July 2007.
The MNI Chicago Report business barometer rose to 53 in August from a reading of 52.3 the prior month. Numbers greater than 50 signal expansion. The median forecast of 53 economists surveyed by Bloomberg was 53. The regional index is viewed as an indicator of business activity across the U.S.

Debt ceiling

Investors are also 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 email. “As investors roll up their sleeves for the last third of the year, volumes should pick up markedly from the current low levels.”
The Chicago Board Options Exchange Volatility Index, or VIX, increased 3.3 percent to a two-month high of 17.36. The equity volatility gauge has surged 29 percent this month, the most since May 2012.
Six of the 10 main groups in the S&P 500 retreated Friday, led by a decline of 0.6 percent among financial and consumer-discretionary stocks. Travelers Cos. slid 0.8 percent to $79.60 and Disney Co. fell 0.8 percent to $60.59.

Computer shipments

Hewlett-Packard dropped 1.2 percent to $22.25 for the biggest decline in the Dow. 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 Thursday in a statement.
Krispy Kreme, the chain that revived itself by expanding beyond sweet treats into coffee and smoothies, tumbled 14 percent to $19.90. 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 percent to $49.30. The company, which acquired email 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.

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