(Bloomberg) -- U.S. stocks closed little changed, as rising technology shares helped offset declines among drugmakers, while investors awaited payrolls data for more evidence that the economy is strong enough to cope with higher borrowing costs.
Apple Inc. rose for a third day to boost tech shares and Whole Foods Market Inc. rallied as much as 6.7 percent on takeover speculation, bolstering consumer staples. Mylan NV sank to a three-year low as drugmakers weighed on the health-care group, with lawmakers continuing to pressure the company over prices for its EpiPen allergy shot. Utilities extended their longest losing streak in 14 years.
The S&P 500 Index added less than 0.1 percent to 2,160.77 at 4 p.m. in New York, erasing a 0.4 percent slide after a European Central Bank official affirmed that the ECB is still in an “accommodative mode.” The Dow Jones Industrial Average lost 12.53 points, or 0.1 percent, to 18,268.50, after reversing a 118-point drop. The Nasdaq Composite Index slipped 0.2 percent. About 6.3 billion shares traded hands on U.S. exchanges, 5 percent below the three-month average.
“There is a lot of optimism priced into the market especially when it comes to the jobs,” said Kevin Kelly, chief investment officer at Recon Capital Partners LLC in Greenwich, Connecticut, which oversees $350 million. “The number this time better live up to expectations because every other indicator is showing that this economy is moving forward and it is doing well. The market is anticipating a rate hike in December, so should a really good jobs number come out, I don't think it should spook it.”
Stocks fell earlier Thursday as lackluster corporate results damped sentiment before the government's jobs report Friday and the start of earnings season next week. The September employment release is in focus as recent data have exceeded forecasts, with a Bloomberg index tracking economic surprises turning positive yesterday for the first time since August. Odds of higher borrowing costs in December are almost 64 percent, while traders are pricing in a nearly 24 percent chance of a Fed hike in November, up from 17 percent last week.
The labor market displayed further signs of strengthening as a report today showed filings for unemployment benefits fell last week almost to the lowest level since 1973. Continuing claims declined to the lowest since 2000. Economists surveyed by Bloomberg forecast data tomorrow will show the economy added 172,000 jobs in September, up from 151,000 a month earlier.
“This is an economy that doesn't need emergency rates any more,” said Ben Kumar, a London-based investment manager at Seven Investment Management LLP, which manages the equivalent of $13 billion. “Recent data and upbeat Fed comments on growth have allowed investors to get more comfortable with that idea, and it means they're ready to tolerate a bit of higher market volatility.”
Among shares moving today, Wal-Mart Stores Inc. dropped 3.2 percent and Yum! Brands Inc. fell 1.3 percent as their disappointing reports added to anxiety over corporate earnings on the cusp of the reporting period. Wal-Mart forecast profits for its next fiscal year that missed some estimates. American Express Co. lost 3.8 percent amid concerns its revenue will miss forecasts. Home Depot Inc. rallied 2.1 percent, the most in three months, as Florida braces for Hurricane Matthew.
The upcoming earnings season will provide fresh indications on the health of corporate America. Analysts are still predicting a profit contraction for S&P 500 members in the third quarter, a sixth straight drop, before Alcoa Inc. unofficially kicks off the reporting period on Oct. 11.
Stocks had a rocky start to the month, with the S&P 500 slipping 0.8 percent in the first two sessions before a bounce yesterday. While the gauge has historically been more volatile in October, it's also a month that has typically yielded the best gains of the year, with an average advance of 1.9 percent over the past 25 such periods. The benchmark on Thursday closed 1.3 percent below the record it last reached in August.
In today's trading, the CBOE Volatility Index fell 1.2 percent to 12.84, wiping out an earlier 6.5 percent climb. The measure of market turbulence fell 1 percent in September after erasing a gain that reached 35 percent. Seven of the S&P 500's 11 main industries advanced Thursday, with raw-materials producers leading with a 0.8 percent climb, while biotechnology shares dragged down the health-care group.
Energy producers gained with crude oil futures above $50 a barrel today for the first time since June on optimism that the global glut will diminish. Schlumberger Ltd. and Occidental Petroleum Corp. increased more than 1.3 percent.
Utilities fell for a 10th consecutive session, the longest since September 2002, with investors continuing to pivot away from shares that offer relatively high dividends as bond yields become more attractive. Amid increased wagers on higher rates, the yield on 10-year Treasuries rose to a three-month high. Phone companies retreated for the sixth time in seven days to hold at a four-month low.
Health-care shares were the biggest drag today, with Endo International Plc down 3.7 percent, while Celgene Corp. and Gilead Sciences Inc. declined more than 1.2 percent. The Nasdaq Biotechnology Index dropped 2.2 percent to a three-week low.
Alnylam Pharmaceuticals Inc. plunged 48 percent to a three-year low after ending development of its late-stage experimental drug for a rare disease because of safety concerns.
To contact the reporter on this story: Anna-Louise Jackson in New York at ajackson36@bloomberg.net. To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, John Shipman
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