Markets Close Mixed, Buffeted by Jobs Data and Syria Concerns

U.S. stocks had a mixed close after volatile trading on Friday, after job market data removed some uncertainty about Federal Reserve policy and after Russian President Vladimir Putin said he would maintain his long-standing support for Syria if the West were to attack.

The Standard & Poor’s 500 index gained 0.09 points or 0.01 percent, closing at 1,655.17. The Dow Jones industrial average fell 14.98 points or 0.1 percent, to 14,922.50, and the Nasdaq Composite added 1.23 points or 0.03 percent, closing at 3,660.01.

For the week, the S&P 500 is up 1.04 percent and the Nasdaq is up 1.1 percent. The Dow is up 0.6 percent after four weekly declines.

The U.S. August payrolls report showed about 169,000 jobs were added, fewer than the 180,000 that had been expected, and July’s figure was revised sharply lower. The unemployment rate fell to 7.3 percent, its lowest since December 2008, though the decline reflected a drop in the share of working-age Americans who either have a job or are looking for one.

Many analysts said despite the weak jobs report the U.S. central bank would not adjust plans to slow its stimulus, currently at $85 billion a month in bond purchases.

Kansas City Fed President Esther George, a consistent hawk who has argued for a tapering in bond purchases all year, said reducing purchases to $70 billion a month could be “an appropriate next step toward normalizing monetary policy.”

Such a reduction would be in line with expectations that have been falling in the last few months.

“Tapering is going to happen but there is a wide range of opinions in terms of how much the Fed is going to taper,” said Joseph Tanious, global market strategist at JPMorgan Asset Management in New York.

“The market is comfortable with the idea (of winding down stimulus) as it is justified by economic growth,” he said, pointing to recent data including an almost eight year high in the pace of growth in the U.S. services sector.

Investors are continuing to assess the possibility of a U.S.-led strike against Syria in retaliation for an alleged chemical weapons attack against its civilians.

Putin made clear on Friday that Russia did not want to be sucked into a war over Syria, signaling that Moscow would maintain ongoing support to Damascus in the event of foreign military intervention.

Tanious said, getting clarity on Russia’s point of view helps ease some concerns about the implications of an attack on Syria, but any U.S. intervention is likely to impact oil and other markets.

“The (equities) market is jittery and that is understandable,” he said.

Energy prices have been among the most volatile on the issue, with investors concerned that military action in the Middle East will weigh on oil supplies. U.S. crude oil has spiked almost 4 percent over the past two weeks and was up 1.7 percent on Friday.

Facebook shares rose 3 percent to $43.95 after hitting $44.56, its highest since the stock’s debut on Nasdaq more than a year ago.

American Tower Corp rose 4.6 percent to $71.91 after the company agreed to buy Global Tower Partners for $4.8 billion.

E*Trade Financial shares jumped 4.6 percent to $16.26 after Goldman Sachs upgraded the brokerage’s stock to “buy” from “neutral” two days after the company received approval to use capital from its bank subsidiary for broader corporate purposes.

Markets Close Lower as Investors Wait for Decision About Syria

American stocks fell in a thinly traded session on Friday as investors avoided making large bets before a long weekend with the situation about Syria still uncertain.

Afternoon trading was volatile, with indexes swinging between break-even levels and solid losses as Secretary of State John Kerry said in televised remarks that Syria’s government used poison gas against civilians and made the case for a limited military response.

“People are uneasy not knowing what’s going on,” said John Carey, portfolio manager at Pioneer Investment Management in Boston. “With that uncertainty and going into the Labor Day holiday, we’re seeing people step back.”

The Dow Jones industrial average was down 30.64 points, or 0.21 percent, at 14,810.31. The Standard & Poor’s 500-stock index fell 5.20 points, or 0.32 percent, at 1,632.97. The Nasdaq composite index was down 30.44 points, or 0.84 percent, at 3,589.87.

Trading was light ahead of the market holiday on Monday for Labor Day. About 3.99 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the daily average so far this year of about 6.31 billion shares.

“I tend to view the weakness as a buying opportunity, barring some global crisis,” said Mr. Carey, who helps oversee about $200 billion in assets. “Syria isn’t the crisis in and of itself, but if we do take military action, there could be repercussions.”

It has been a tough month over all for stocks. The S.& P. 500 fell 3.1 percent in August and lost 1.8 percent for the week in a third decline in the last four weeks.

The Nasdaq fell 1.9 percent for the week while the Dow slid 1.3 percent in its fourth consecutive weekly loss. For the month, the Dow fell 4.4 percent and the Nasdaq lost 1 percent. Only one of the 30 Dow components, Microsoft, ended higher in August.

Almost 70 percent of stocks traded on the New York Stock Exchange closed lower on Friday, while 73 percent of Nasdaq-listed shares ended in negative territory.

Video game companies were among the Nasdaq’s biggest decliners on Friday. Electronic Arts fell 3.37 percent, to $26.64, while Activision Blizzard fell 2.57 percent, to $16.32.

The chip maker OmniVision Technologies tumbled 16.08 percent on earnings weakness. It forecast current-quarter adjusted profit largely below expectations as rising competition and a slowdown of smartphone sales in the United States led to an inventory pileup.

Salesforce.com, the best performer in the S.& P. 500, jumped 12.55 percent, to $49.13, after the company raised its fiscal 2014 sales outlook and reported better-than-expected revenue and earnings. The Apache Corporation, the oil and gas producer, climbed 8.95 percent, to $85.68. The company said it was selling a 33 percent stake in its Egypt oil and gas business for $3.1 billion to the state-owned Chinese oil giant Sinopec Group.

The price of the benchmark 10-year Treasury note fell 8/32, to 97 16/32, and its yield rose to 2.79 percent, from 2.76 percent late Thursday.

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Wall Street Mostly Flat at Close

It was another high day on Wall Street — barely.

After spending most of Friday flat or down, stocks rallied at the last minute and closed slightly higher, just enough to post new nominal highs for the Dow Jones industrial average and the Standard & Poor’s 500-stock index.

The gains were tiny. And the new high, which does not account for inflation, means little to investors, who hardly have more money now than they did a day earlier. But it is a sign that investors believe that the market’s rally this year may not be over yet.

The S.& P. 500 has closed higher seven days in a row. The last time it did that was in March.

Investors had to look past a pessimistic forecast from United Parcel Service, which said it was expecting a slowdown in United States industry. And in the afternoon, Boeing shares slipped after one of the company’s 787 jets had a fire in London, reviving fears of the troubles that the plane had with batteries this year.

Other economic news was mixed. Profits at Wells Fargo and JPMorgan Chase were better than expected, and that helped financial stocks. But a University of Michigan measure of consumer sentiment came in lower than expected for this month.

Investors will get a lot more information next week, when major reports on inflation and retail sales are due. That is also when the pace of company earnings reports will pick up sharply. Results are due from the remaining big banks, as well as General Electric, Intel, Microsoft and other industry bellwethers.

The Dow closed up 3.38 points, just 0.02 percent, at 15,464.30. The Standard & Poor’s 500-stock index rose 5.17 points, or 0.3 percent, to 1,680.19. Both indexes also closed at nominal highs on Thursday.

The Nasdaq composite edged up 21.78 points, or 0.6 percent, to 3,600.08. It is still well short of its record high of 5,048, set in March 2000.

All the big indexes ended the week ahead 2 percent or more.

In government bonds, the benchmark 10-year Treasury note fell 5/32 to 92 24/32, sending the yield up to 2.59 percent, from 2.57 percent late Thursday.

Shares in U.P.S. sank $5.33, or 5.8 percent, to $86.12 after the company said its second-quarter and full-year earnings would be less than analysts had projected because the company’s customers were using cheaper shipping options. U.P.S. also said it was seeing a slowdown in American industry.

FedEx shares fell, too, down $2.11, or 2 percent, to $102.29.

Cost-cutting lifted profits at Wells Fargo, and its stock rose 74 cents, or 1.8 percent, to $42.63. JPMorgan Chase reported a 32 percent jump in profits, but its stock fell 17 cents to $54.97.

Anthony Conroy, managing director and head trader for the ConvergEx Group, said JPMorgan’s credit numbers were strong. “That means the consumer’s out there spending and borrowing and propping up the whole economy, and that’s a good thing,” he said.

Mr. Conroy said he expected stocks to rise as long as second-quarter earnings reports at least matched the low expectations that investors have. “The three most important things in the next couple of weeks are earnings, earnings and earnings,” he said.

A Calm Close to a Volatile Month

Given the wild trading of late, it was a calm close to the month.

After flitting between tiny gains and losses most of Friday, the stock market closed mostly lower, a peaceful end to the most volatile month in nearly two years.

“It’s a dull Friday,” said Gary Flam, a stock manager at Bel Air Investment Advisors. A bull market, he added, is “rarely a straight march up.”

The Standard & Poor’s 500-stock index ended its bumpy ride in June down 1.5 percent, the first monthly loss since October. The index still had its best first half of a year since 1998.

Investors seemed unsure how to react to recent statements by Federal Reserve officials about when the central bank might end its support for the economy.

Mixed economic news on Friday added to investor uncertainty after big stock gains. An index of consumer confidence was up, but a gauge of business activity in the Chicago area plunged.

“Investors don’t know what to make of the news,” said John Toohey, vice president for stock investments at USAA Investment Management. “I wouldn’t be surprised to see more ups and downs.”

The S.& P. 500 closed down 6.92 points, or 0.4 percent, to 1,606.28. The Dow Jones industrial average fell 114.89 points, or 0.8 percent, to 14,909.60. The Nasdaq composite index rose 1.38 points, or 0.04 percent, to 3,403.25.

Stocks have jumped around in June. By contrast, the first five months of the year were mostly calm, with small but steady gains as investors bought on news of higher home prices, record corporate earnings and an improving jobs market.

By May 21, the S.& P. 500 had climbed to a record 1,669, up 18 percent for the year. The Fed chairman, Ben S. Bernanke, spoke the next day and prices began seesawing.

Investors have long known that the central bank would eventually pull back from its bond purchases, which are intended to lower interest rates and get people to borrow and spend more. Last week, Mr. Bernanke got more specific about the timing, saying the Fed could start purchasing fewer bonds later this year and stop buying them completely by the middle of next year if the economy continued to strengthen.

Investors dumped stocks, but then had second thoughts this week as other Fed officials stressed that the central bank would not pull back on its support soon.

Bonds have also been on a bumpy ride in recent weeks, mostly down.

The prospect of fewer purchases by the Fed sent investors fleeing from all sorts of bonds — municipals, United States Treasury securities, corporate bonds, foreign government debt and high-yield bonds. Investors withdrew a record $23 billion from bond mutual funds in the five trading days that ended Wednesday, according to Bank of America Merrill Lynch.

Bond yields, which move in the opposite direction of bond prices, have rocketed. On Friday, the benchmark 10-year Treasury note fell 3/32 to 93 19/32, bringing the yield up to 2.49 percent, from 2.47 percent late Thursday. Last month, the yield was as low as 1.63 percent.

San Onofre Nuclear Plant in California to Close

The owners of the San Onofre nuclear power plant in Southern California, which has been shut since January 2012, said on Friday that they would close it permanently because of uncertainty over when it could be reopened.

The two reactors at San Onofre had not run since a small amount of radioactive steam escaped from new tubes damaged by vibration and friction. Coming months after the Fukushima Daiichi meltdown in Japan, the event prompted a wave of public opposition and set off a legal and regulatory battle that included Southern California Edison, the Nuclear Regulatory Commission and Mitsubishi Heavy Industries, which manufactured the parts that leaked.

Those parts, called steam generators, cost more than $600 million. In the end, uncertainty over the plant’s fate “was not good for our customers, our investors, or the need to plan for our region’s long-term electricity needs,” said Theodore F. Craver Jr., chief executive of the utility’s parent company, Edison International.

The decision delighted nuclear opponents. “I approach today with a good deal of joy,” said S. David Freeman, who shut down construction on several reactors when he ran the Tennessee Valley Authority, and who ran the Sacramento Municipal Utility District after it retired the Rancho Seco nuclear plant two decades ago.

“I think this is a step in the right direction, another move toward the renewable revolution that is under way in the state of California,” Mr. Freeman said, adding that closing the reactors opens up the market to use the renewable power that will follow. For now, though, the replacement power source is natural gas.

The nuclear industry has had a difficult year as it tries to compete with cheaper, abundant natural gas. San Onofre’s two reactors are the third and fourth reactors to be retired so far this year in the United States.

“It’s no secret that power markets have been radically changed by the development of shale gas,” said John Reed, an investment banker who specializes in nuclear reactors. “That changes the economics of any other power supply option, including nuclear.”

Dominion shut its reactor in Wisconsin in May because of unfavorable economics, and Duke said in February that it would not restart Crystal River 3 because mechanical problems were too expensive to fix.

The loss of San Onofre has already pushed up electricity prices in Southern California, to about $4.15 a megawatt-hour higher than prices in Northern California. Those higher prices are an inducement to developers to build new generation, either natural gas or renewable energy, according to Marie Rinkoski Spangler, an electricity analyst at the Energy Department’s Energy Information Administration.

Ms. Rinkoski Spangler said that since June 2012, California has added slightly more generating capacity than it will lose with the retirement of the reactors, in the wrong places.

“Geography really matters,” she said. “The generation itself is not enough, because of where San Onofre sat” near Los Angeles and San Diego.

At the California Independent System Operator, the company that runs the power grid in most of the state, Steve Berberich, the chief executive, said that most of the replacement power had come from natural gas, and that if California’s goal is to reduce greenhouse gas emissions per kilowatt-hour, “you’re moving in the wrong direction.”

But in the longer term, he said, retiring San Onofre would encourage the replacement of older power plants with newer ones that would produce more electricity with the same amount of fuel. And the newer ones could increase and decrease their output faster, he said, making them useful to balance a system with a lot of wind and solar generation, which is highly variable.

San Onofre 2 and 3 entered commercial operation in August 1983 and April 1984. A third reactor was mothballed in 1992.

Many nuclear plants around the country have won permission from the Nuclear Regulatory Commission to run 20 years beyond their initial 40-year licenses, but in a conference call with reporters, Mr. Craver of Edison International said that the prospects for license renewal were uncertain, following the three meltdowns at the Fukushima Daiichi plant in March 2011, and the demand by regulators for a re-evaluation of San Onofre’s vulnerability to earthquake.

Edison had been seeking to restart one of the units at 70 percent power, a level it thought the steam generators could tolerate, but when plant opponents persuaded a panel of three administrative law judges at the Nuclear Regulatory Commission that this would require a public hearing, the company concluded that the proceedings could stretch to the end of next year or longer. Operation and maintenance expense at the plants, which employ 1,500 people are roughly equal whether it is running or not, he said, and if the plant could not reopen by December, retiring it would be cheaper.

The company has $2.7 billion saved up for decommissioning, which is about 90 percent of what is required, he said. Edison shares ownership with San Diego Gas & Electric, which owns 20 percent, and the city of Riverside, which owns 1.79 percent.

Edison has about $2.1 billion invested in the plant, the fuel and related assets. Division of costs between Edison’s shareholders and ratepayers, its insurers and Mitsubishi Heavy Industries, which supplied the heat exchangers, has not been determined.

As for the plant’s workers, the closure will be felt in the area. “When 1,100 people lose their jobs, there will certainly be an impact,” said Bob Baker, the mayor of the nearby city of San Clemente. “San Onofre changed San Clemente when it opened, and it’s going to change San Clemente now that it’s closing.”

Jones Group to Cut 8 Percent of Staff and Close 170 Stores

Shares of the company rose 2.7 percent to $13.97 on the New York Stock Exchange after it announced the cuts, which it said would cost it about $40 million to $60 million over the next 15 months.

Jones' U.S. stores have struggled in the face of aggressive competition. Sales during the all-important holiday season fell about 7 percent.

Earlier this year, activist hedge fund firm Barington Capital Group, run by James Mitarotonda, met with Jones Group management and suggested the company cut expenses and focus on its most successful brands, while possibly selling other brands.

In the past, Barington has invested in several retailers, including Dillard's Inc and Warnaco, and pushed for operational and strategic changes. PVH Corp acquired Warnaco in February.

"Barington has been pushing for an in-depth review of the Jones brands and even a culling of some brands," said Damien Park, managing partner at Hedge Fund Solutions, a research and consulting firm focused on shareholder activism. "That was missing in today's announcement."

Barington typically seeks a seat on the boards of many companies in which it invests, Park added.

"Given their past record, it's highly likely they won't rest until they get board representation," he said.

A representative at Barington declined to comment. A Jones Group spokeswoman confirmed that the company met with Barington but declined to comment further.

Jones Group shares are up 23 percent so far this year.

The company estimated first-quarter adjusted earnings of about 15 cents per share, shy of Wall Street expectations for a profit of 25 cents a share. It estimated first-quarter revenue at about $1 billion.

First-quarter gross margins are estimated to fall 90 basis points below the company's own forecasts as a highly promotional environment and an unusually cold weather hurt sales.

Jones said it will cut U.S. retail staff by about 18 percent and corporate, support and supply chain staff by about 2 percent.

The company said upon completion of the restructuring plan, it expects outlet stores comprising a significantly higher percentage of its overall retail locations.

The company is now betting on its wholesale division, where sales to chains like Macy's Inc and Nordstrom Inc contribute about half its revenue.

Jones said it will streamline the wholesale business to focus more on sportswear and also consolidate some distribution and supply chain facilities.

The restructuring is already underway and includes 50 store closures announced in the fourth quarter of 2012, Jones said.

Jones had a total of 594 domestic retail stores at the end of 2012, which include 409 outlet stores. The company had about 6,250 full-time employees and about 5,540 part-time employees as of December 31, according to a regulatory filing.

(Reporting by Siddharth Cavale in Bangalore; Editing by Rodney Joyce, Supriya Kurane and David Gregorio)

DealBook: Judge Approves Hostess Brands' Plan to Close Down

David Pardo/Daily Press, via Associated PressThe doors shut on a Hostess Bakery outlet store in Victorville, Calif., last week.

A federal bankruptcy judge on Wednesday approved plans for Hostess Brands to wind down its operations, but there is little doubt that its best-known brand, Twinkies, will live on.

The company, whose corporate ancestors go back 82 years, said it would put Twinkies on the auction block, along with its other famous brands, including Ho Hos, Sno Balls, Ring Dings and Wonder Bread.

In granting the motion by Hostess, Judge Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York said it was important to have a quick and orderly shutdown of the company to prevent the deterioration of its factories and assets.

The company’s chief executive, Gregory F. Rayburn, testified in court that he needed to lay off 15,000 of his 18,500 employees on Wednesday afternoon so that they could begin applying for unemployment benefits as soon as possible. He said such speed was necessary for maximizing the remaining value of the company.

“From this point forward, I need two things to happen,” Mr. Rayburn told the judge. “I need to maximize the value of the estate, and I need to do the best thing for the employees.”

Wednesday’s hearing came after a last-ditch mediation session on Tuesday between Hostess and its bakery workers union. After several hours of talks, the mediation efforts collapsed.

Hostess announced its intention to liquidate last Friday, and since then the company has received expressions of interest for its bakery brands from a wide range of potential buyers. Without naming names, an investment banker for Hostess, Joshua S. Scherer of Perella Weinberg Partners, said in court on Wednesday that they included regional bakeries, national competitors and retail customers along the lines of Wal-Mart Stores and Kroger.

Mr. Scherer added that his firm had plans to contact around 145 financial firms, including private equity shops and liquidators, to gauge their interest.

Investment concerns like Sun Capital Partners and C. Dean Metropoulos & Company, the owner of Pabst Blue Ribbon beer, have already said that they are interested in buying some or all of Hostess’s remains. Sun Capital has said that it would like to buy all of Hostess, not just its brands, hoping to preserve the company and improve its often-tense relations with its unions.

Mr. Scherer said that he expected asset sales to reap “significant values,” perhaps more than $1 billion. Hostess had revenue of $2.5 billion in fiscal 2012, and a net loss of $1.1 billion.

Its famous brands have been sold and traded for decades among companies, including I.T.T., Ralston Purina and Continental Baking.

“These products will surely live on in one form or the other — because these brands are about as indestructible as Hostess’s baked goods are,” said Jeffrey A. Sonnenfeld, senior associate dean for executive programs at the Yale School of Management.

Hostess was unable to resuscitate itself during this bankruptcy, its second in less than a decade. When it filed for bankruptcy last January, it had nearly $1 billion in debt as well as labor costs and work rules that it insisted were unsustainable.

According to Mr. Raymond, what sent the company into bankruptcy was both the refusal of one of its largest unions, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, to accept far-reaching concessions and a strike that the union began on Nov. 9, crippling two-thirds of the company’s 33 bakeries.

The bakery workers union, with 5,600 workers at Hostess, repeatedly said that it saw no reason to grant a new round of givebacks — after having granted major concessions in the previous bankruptcy of Hostess — because it was convinced that Hostess was heading toward liquidation, with or without concessions. That union and Hostess’s other major union, the Teamsters, repeatedly asserted that the company was mismanaged, having had six different chief executives since 2002. The unions maintained that Hostess’s top management had done little to modernize the company’s aging bakeries or its sugary product offerings — in an era when the nation has grown increasingly health conscious.

After filing for bankruptcy protection in January, Hostess demanded lower-cost contracts from the Teamsters, whose workers at Hostess average about $20 an hour, and the bakery workers, who average about $16. To help the company survive, the Teamsters, with 6,700 members at Hostess, most of them drivers, reluctantly agreed to a contract with numerous concessions. They include new work rules, an immediate 8 percent pay cut, a 17 percent reduction in Hostess’s contribution toward health coverage and a suspension of its pension payments until 2015. In return, the company agreed to give its unions two of the nine seats on its board and a 25 percent stake in the company.

But the bakery workers’ union resisted a similar deal, convinced it would drive down wages in the industry while in no way guaranteeing Hostess’s survival. That union went on strike rather than accept that offer, hoping the company would bend.

A week after the strike began, Mr. Rayburn said he would liquidate the company.

The looming liquidation of Hostess has been a topic of debate, with many on one side criticizing greedy, stubborn labor unions and many on the other blaming what the bakery workers’ president has called “vulture capitalists.” The company entered its first bankruptcy in 2004 with $450 million in debt, and exited five years later with even more debt — $670 million.

“The private equity owners put this thing in such deep debt and asked for such deep concessions that it put the unions in a difficult situation,” said Thomas A. Kochan, a professor at the Sloan School of Management at the Massachusetts Institute of Technology. “The unions weren’t sure whether these concessions would be enough to salvage the company.”

Hostess Brands has corporate roots going back to 1930, but the company has had that name only since 2009, when Ripplewood Holdings, the private equity firm that took control of Interstate Bakeries, renamed it. Ripplewood, which has close ties to Richard A. Gephardt, a former Democratic House majority leader and longtime ally of labor unions, is rarely viewed as a predatory private equity company — it originally bought Hostess as part of an effort to save distressed unionized companies.

“The company had plenty of time to figure out a new business model in terms of products, but it didn’t, so it was convenient to blame labor for the company’s failure,” said John W. Budd, a professor of industrial relations at the Carlson School of Management at the University of Minnesota. “Hostess’s creditors weren’t willing to make any more concessions, so if they didn’t see a viable business model, that raises questions of why labor should be making more concessions.”

Staples to Close More Stores

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