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.

Survey Details Data Theft Concerns for U.S. Firms in China

BEIJING — A quarter of companies that are members of a leading U.S. business lobby in China have been victims of data theft, a report by the group said Friday, as ties between Beijing and Washington have become increasingly strained over the threat of cyberattacks.

Twenty-six percent of the members who responded to an annual survey said that their proprietary data or trade secrets had been compromised or stolen at their China operations, according to the report from the business lobby, the American Chamber of Commerce in China.

“This poses a substantial obstacle for business in China, especially when considered alongside the concerns over I.P.R. enforcement and de facto technology transfer requirements,” the chamber said, referring to weak enforcement of intellectual property rights.

Mandiant, a U.S. computer security company, said in February that a secretive Chinese military unit was likely behind a series of hacking attacks that targeted the United States and stole data from more than 100 companies.

That set off a war of words between Washington and Beijing.

Representative Dutch Ruppersberger, Democrat of Maryland, said last month that U.S. companies had suffered estimated losses in 2012 of more than $300 billion due to the theft of trade secrets, much of it the result of Chinese hacking.

China says the accusations lack proof and that it is also a victim of hacking attacks, more than half of which originate from the United States.

Hong Lei, a spokesman for the Chinese Foreign Ministry, called the survey a “completely irresponsible action.”

“We hope the relevant side doesn’t politicize financial and trade problems, does not exaggerate the so-called issue of online leaks and does more conducive things for China and the United States,” Mr. Hong told reporters Friday.

The survey by the chamber, commonly known as AmCham, was conducted among 325 members across China late last year, before the release of the Mandiant report.

Only 10 percent of companies in the survey said they would use China-based cloud computing services, with most citing security concerns. Blocked Internet searches in China had impeded business for 62 percent of respondents.

U.S. officials have pressed China to address Internet attacks and cyberspying against U.S. companies. President Barack Obama raised hacking concerns in a phone call with President Xi Jinping of China earlier in March.

A recent assessment by U.S. intelligence leaders said that for the first time, cyberattacks and cyberespionage had supplanted terrorism as the top threat.

Most companies in the AmCham survey expressed optimism about the business outlook in China, with many reporting higher profit margins for their China units. But companies gave lower expectations for future investment and cited rising labor costs as a top concern. Perceptions that China’s investment environment is stagnating are increasing, according to the survey.

Member companies “have not felt over the last four or five years that there have been commercially significant positive changes in the business environment or the investment environment,” Christian Murck, president of AmCham China, told reporters.

“When you have an economy which is making a transition to a market economy, but which is not yet there, there is a feeling that if you are not moving forward with an indicated path of future policy that you are effectively moving backward,” he said at a briefing on the survey.

The survey also cited a steep increase in concerns over the protection of intellectual property, like copyrights and trademarks, with 72 percent of respondents saying enforcement in China was ineffective or totally ineffective, an increase of 13 percentage points over last year.

Perceptions that technology transfer was increasingly a requirement for access to China’s market also jumped 10 points to 37 percent, the chamber said, with higher rates of concern reported in the aerospace, automotive, chemical in information technology sectors.

Wall Street Defies China Concerns

Stocks on Wall Street rose modestly on Monday as investors kept up a recent trend of buying on dips, with equities recovering from early weakness despite concerns about growth and China’s housing market.

The Standard & Poor’s 500-stock index ended the day up 0.5 percent, the Dow Jones industrial average added 0.3 percent and the Nasdaq composite index rose 0.4 percent.

The S.&P. 500 has jumped about 7 percent so far in 2013 and has resisted calls for a pullback even though there are few catalysts to drive shares definitively higher. The Dow closed less than 40 points away from hitting its closing high, while the S.&P. 500 was 3 percent below its record close.

Concerns about budget cuts in the United States and the euro zone debt crisis also have served as reasons for investors to take a breather in the face of technical resistance. Any sign that the $85 billion in cuts were beginning to take a toll on the economy could jostle markets.

“The stock market still represents opportunity for investors, especially when you look at the domestic market,” aid Eric Teal, chief investment officer at First Citizens Bancshares in Raleigh, North Carolina, which manages $5 billion, “but it wouldn’t be surprising if we pulled back on the concerns over China and Europe.”

Retail stocks ranked among the strongest after Deutsche Bank raised price targets on Target and Macy’s . Target climbed 3.6 percent and Macy’s shares rose 2.4 percent. The S&P retail index jumped 1.3 percent.

Bucking the trend was J.C. Penney, which is struggling to compete against its rivals, falling 4.6 percent.

Plans to tighten curbs on the housing market in China and a slowdown in the growth of that country’s services sector prompted worries about growth in the world’s second-largest economy. In addition, China’s services industries expanded at the slowest pace in five months in February.

Also weighing on the market, Italy could be inching closer toward another election within months after center-left leader Pier Luigi Bersani issued an ultimatum to anti-establishment 5-Star Movement boss Beppe Grillo to support a new government or return to the polls. European market indexes closed mixed.

Providing some support for the market, Janet Yellen, the Federal Reserve’s influential vice chairwoman, said the central bank’s aggressive monetary stimulus is warranted, given how far below its full potential the economy is operating.

Hess shares rose 4.1 percent after the company said it would exit its retail, energy marketing, and energy trading businesses. The company also boosted its dividend by 150 percent and announced a stock buyback program.

Ferro shares surged 31.2 percent after A. Schulman offered to buy the company for $563 million, although Ferro rejected the bid.

DealBook: Concerns Mount That Investors Might Balk at Debt Buyback in Greece

John Kolesidis/ReutersThe offices of Greece’s finance and development ministries in Athens.

LONDON — The hedge funds holding Greek bonds may have become too greedy for their own good.

It’s just two days before the books close on a plan to reduce Greece’s debt load by having the country purchase its deeply discounted bonds from banks and investors. But bankers close to the transaction are voicing concerns that hedge funds might “blow up the deal” by holding out for a higher price.

If the buyback fails, they say, the consequences would be severe. Not only could the International Monetary Fund refuse to lend more money to Greece, but wealthy European countries, already skeptical about extending yet another round of loans to Greece, could withdraw their support. In that case, the 40 billion euro-plus lifeline that the country needs to remain solvent would be in jeopardy.

“People have fallen in love with their profits, and they have lost touch with the downside,” said Petros Christodoulou, a top executive at the National Bank of Greece who presided over the 100 billion euro private sector debt restructuring earlier this year as head of Greece’s debt management agency. “If this thing fails, there is total collapse, and the price goes to 20 cents.”

On Monday, Greece surprised the market by offering, in effect, to repurchase as much as 30 billion euros worth of bonds at an average price of 32 to 34 cents on the euro. That represents a roughly 5 percent premium to where the bonds were trading at the end of the previous week.

Having borrowed 10 billion euros, the net debt relief would be around 20 billion euros. European officials feel that would be enough to satisfy the I.M.F.’s demand that Greece try to bring its debt level below 110 percent of its gross domestic product by 2022.

But numerous hedge funds — many of which scooped up Greek bonds in the mid-teens this summer and are now sitting on fat profits — are telling Greece that they may not participate in the buyback. Instead, they are betting that the participation of Greek banks and short-term investors looking for a quick profit will be enough to get the deal done. In theory, the strategy would allow the hedge funds to cash out at prices of 40 cents and beyond when bonds rally in the aftermath.

Buying Greek bonds on the cheap has become one of the more popular trades of late in Europe. Hedge funds like Third Point, Brevan Howard, Greylock and others have accumulated significant amounts of the debt.

With the voluntary buyback deal in question, bankers are contemplating the use of sophisticated legal stratagems that could force investors to sell out at much lower prices.

One possibility would be for the government to buy back as much debt as it can at current prices. Then Greece would come back with another lower offer; as long as two thirds of investors agree to the deal, collective action clauses would kick in, forcing reluctant investors to accept the government’s terms. Reaching that percentage would be easier, bankers say, as this time more of the bonds would be in friendly hands and would vote accept the offer.

Legal experts have also pointed out potential loopholes in the contracts of the restructured bonds that would — if push came to shove — allow Greece to keep current on its bond payments to European governments while forcing private sector creditors to take a loss.

In a further reminder of Greece’s tenuous financial position, Standard and Poor’s lowered its rating for Greek debt to selective default in a response to the buyback action. The rating agency said that when the buyback is finished, Greece’s rating would return to its higher CCC level. Any move, however, by the country to deploy more forceful measures l would most likely result in Greek bonds keeping a selective default rating.

“I am shocked that hedge funds are taking this so lightly,” said a person with knowledge of the buyback discussions who spoke on condition of anonymity. “There is an 80 percent chance that the I.M.F. will walk if this deal does not work — these guys have become their own worst enemy.”

In a deal this sensitive and crucial, there is always a fair amount of chest puffing as opposite sides push for the best possible outcome. The threat by hedge funds to not participate may well be a bluff to force Greece to up its price. Greece, on the other hand, has little to gain by forcing a bad deal on foreign investors at a time when it is relying on them to drive the privatization process.

But, as in all games of chicken, the risk of collision — or, in this case, a botched deal that results in Greece not getting its desperately needed money — is never all that far away.

Common Sense: Apple’s Map App Could Raise Antitrust Concerns

These milestones were reached with the steady hand of Timothy D. Cook at Apple’s helm, but they seem inseparable from Mr. Jobs. They are the result of initiatives begun during his tenure and, in many ways, reflect his personality — one that was perfectionist, competitive, driven and controlling.

Those qualities have remained on display at Apple in the year since his death, most recently in the decision to substitute Apple mapping software for rival Google’s in the iPhone 5 and the new iOS 6 operating system, as well as allegations that Apple and book producers conspired to control the price of e-books.

Apple hasn’t fully explained its decision to replace Google’s maps, but it probably reflects the evolution of the Apple-Google relationship from close allies to fierce competitors, a process that began well before Mr. Jobs’s death. Apple also hasn’t indicated whether it was carrying out Mr. Jobs’s wishes, but the decision seems consistent with his “compulsion for Apple to have end-to-end control of every product that it made,” as Walter Isaacson put it in his book “Steve Jobs.”

Apple’s use of its own mapping technology in the iPhone appears to be a textbook case of what’s known as a tying arrangement, sometimes referred to as “bundling.” In a tying arrangement, the purchase of one good or service (in this case the iPhone) is conditioned on the purchase or use of a second (Apple maps).

To the degree that tying arrangements extend the control of a dominant producer, they may violate antitrust laws. Probably the best-known example was Microsoft’s attempt to bundle its Internet Explorer browser on Windows software, to the disadvantage of Netscape, a rival browser, despite complaints that Explorer was initially an inferior product. This was the linchpin of the government’s 1998 antitrust case against Microsoft. E-mails were introduced as evidence in which Microsoft executives indiscreetly stated their intentions to “smother,” “extinguish” and “cut off Netscape’s air supply” by bundling Explorer with Windows.

Among other findings, the judge ruled that Microsoft had engaged in an illegal tying arrangement. The outcome of the case kept the door open to competition in the browser market. Today, the once-dominant Internet Explorer faces stiff competition from rivals like Mozilla Firefox and Google Chrome. Microsoft’s settlement came too late for Netscape’s browser, which was no longer being developed or supported after 2007. But Firefox traces its lineage to Netscape’s source code.

Could Apple’s map suffer a similar fate?

Early users searched for locations and got nonsensical results. Mad magazine ran a parody of the famous Saul Steinberg New Yorker cover of the world seen from Ninth Avenue “now using Apple Maps,” in which the Hudson was the Sea of Galilee and other landmarks were ludicrously misidentified.

Mr. Cook swiftly tried to contain the damage. “Everything we do at Apple is aimed at making our products the best in the world. We know that you expect that from us, and we will keep working nonstop until Maps lives up to the same incredibly high standard,” he said a week ago.

Would Mr. Jobs have been so quick to apologize? Perhaps not. He was famously resistant to the idea after complaints about the iPhone 4’s antenna, and the Apple “genius” manual instructs employees never to apologize for the quality of Apple technology.

Bundling its maps with the iPhone 5 may yet prove to be a strategic blunder for Apple, but it may nonetheless skirt the boundaries of the antitrust laws that tripped up Microsoft. “There’s no antitrust theory under which vertically integrating into an inferior component is considered anticompetitive,” Herbert Hovenkamp, an antitrust professor at the University of Iowa College of Law, told me. That’s because the problem is considered self-correcting by market forces. “There have been lots of complaints about tying arrangements involving inferior products. But ordinarily, incorporating an inferior product doesn’t increase your market share, because consumers leave for a better product. It’s not a promising strategy,” Professor Hovenkamp said. The danger for Apple is that customers will choose an Android phone with a superior Google Maps application rather than an iPhone.

An exception is when a monopolist does it, which is what happened with Microsoft. If a consumer used Microsoft Windows, the dominant software, Explorer was installed by default. “This arose with Microsoft because back then Explorer was considered inferior and quirky,” Professor Hovenkamp said. “But that wasn’t why it was a violation. It’s because consumers had no choice.” By contrast, Apple’s iOS isn’t the dominant smartphone operating system. Apple’s software has captured 17 percent of the global smartphone market, compared with 68 percent for Google’s Android. Apple users who want Google maps can readily switch to an Android phone. “Most tying arrangement cases have involved firms with close to 100 percent market shares,” Professor Hovenkamp noted.

The real test will be whether Apple makes rival mapping apps readily available for downloading on its iPhones. In his apology, Mr. Cook suggested that iPhone users try alternatives, and even suggested using Google maps by going to Google’s Web site. Google said it was working on a map application for the iPhone.

From an antitrust perspective, the e-books controversy is more serious. United States antitrust authorities have accused Apple of conspiring with major book publishers to raise e-book prices, and Apple offered to settle a European investigation into the same practices. The Justice Department cited a passage in Mr. Isaacson’s book in which Mr. Jobs called the strategy an “aikido move,” referring to the Japanese martial art, and said, “We’ll go to the agency model, where you set the price, and we get our 30 percent, and yes, the customer pays a little more, but that’s what you want anyway.”

The charges describe a classic price-fixing arrangement, “which is presumptively illegal,” Professor Hovenkamp said. “Everybody wants market dominance, not just Apple. But it’s how you go about it. You can’t go out and fix prices.” Apple has denied the charges, and a trial has been set for next year.

Mr. Cook’s challenge has always been to guide Apple out of the shadow of its visionary and charismatic founder. Can he encourage Mr. Jobs’s competitive zeal and drive for perfection while distancing Apple from Mr. Jobs’s potentially damaging — even unlawful — need to dominate and control? “Historically, Apple hasn’t been very sensitive to antitrust issues,” Professor Hovenkamp said.

There’s no quarreling with Apple’s extraordinary success, and Mr. Jobs’s obsession with controlling all aspects of Apple’s products clearly paid off for its customers and shareholders. It proved to be the right strategy for the time. But competition in smartphones and Apple’s other efforts has intensified in the year since Mr. Jobs died, and Apple may not be able to continue blindly down that path. With his swift apology for the imperfections of Apple’s maps, Mr. Cook seems to have taken a step in the right direction. If he also settles the e-books case and makes Google’s and other map applications readily available to iPhone users, he’d be signaling a clear break from the past and encouraging Apple to embrace, rather than stifle, competition.

This article has been revised to reflect the following correction:

Correction: October 5, 2012

An earlier version of this column referred incorrectly to a case in which Microsoft resolved anticompetitive concerns by agreeing to offer users a choice of browser. The agreement was part of a 2009 settlement of a European antitrust case, not the United States government's 1998 antitrust case.