US stocks slipped on Friday as a drop in the British pound injected unwanted volatility to financial markets, while a weaker-than-expected jobs report was not enough to derail expectations for a rate hike from the US Federal Reserve before the end of the year.
Major indexes posted their first negative week in four.
The pound lost 1.4 percent to the US dollar on Friday, and at one point earlier it had tumbled as much as 10 percent over just a few minutes, a “flash crash” that fueled concerns about the vulnerability of the currency and triggered volatility across jittery markets.
Despite the sharp drop in sterling, the dollar index ended the day lower.
“I don’t think the pound itself is going to hurt US earnings, but the volatility and the big drop you’ve seen in the last week are disturbing,” said Paul Zemsky, chief investment officer of multi-asset strategies and solutions at Voya Investment Management in New York.
The pound lost more than 4 percent versus the US dollar this week and hit its lowest level in more than 30 years.
NOT WEAK ENOUGH
Stocks were also weighed by a report showing the US economy created 156,000 jobs last month, shy of the estimate for 175,000, while the unemployment rate ticked up to 5 percent.
It was the third straight month of slowing growth in job creation, but the data was not seen as weak enough to prevent the Fed from raising rates later this year.
“The Fed tightening into economic strength is fine, but it is a headwind when valuations are high,” Zemsky said.
At 17 times, the S&P 500’s price-to-earnings ratio is near the highest it has been over the past decade.
The Dow Jones industrial average fell 28.01 points, or 0.15 percent, to 18,240.49, the S&P 500 lost 7.03 points, or 0.33 percent, to 2,153.74 and the NASDAQ Composite dropped 14.45 points, or 0.27 percent, to 5,292.40.
The three indices closed down for the week after three consecutive weeks of gains.
Adding to trader jitters, Democratic US presidential candidate Hillary Rodham Clinton and her Republican rival Donald Trump are today to face off in the second of three debates ahead of next month’s presidential election.
Zemsky said markets have priced a Clinton victory and some traders might have hedged positions ahead of the weekend.
Among other heavy losers on Friday, chemical company PPG dropped 8.3 percent to US$93.73 after forecasting a third-quarter loss and Tyson Foods plunged 8.9 percent to US$67.75 after Pivotal Capital downgraded its stock to “sell” from “buy.”
Honeywell shares plunged 7.5 percent after the international conglomerate lowered its profit and sales forecast, citing, among other things, lower shipments in its aviation business and delays in some of its defense and space programs.
Declining issues outnumbered advancing ones on the NYSE by a 2.27-to-1 ratio; on NASDAQ, a 1.89-to-1 ratio favored decliners.
The S&P 500 posted four new 52-week highs and four new lows; the NASDAQ Composite recorded 55 new highs and 39 new lows.
About 6.6 billion shares changed hands in US exchanges, compared with the 7.1 billion daily average over the past 20 sessions.
Other industrial stocks were weak, with Dow members General Electric and United Technologies losing 0.7 percent and 1.5 percent, respectively.
Boeing, another Dow member, lost 0.4 percent despite announcing a contract to sell Qatar Airways up to 100 planes for as much as US$18.6 billion.
Gap surged 15.2 percent after the apparel retailer reported that comparable sales for last month fell 3 percent, but added that the performance was hindered by a fire at a New York distribution center.
Analysts viewed the report as strong and said it indicated a better trend for the retailer after a lengthy slump.
Additional reporting by AFP
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