(Bloomberg) -- U.S. stocks fell, with benchmark indexes tumbling the most in six weeks, as better-than-forecast jobs data fueled speculation the Federal Reserve is moving closer to raising interest rates.
Apple Inc. rose 0.5 percent as the company will be added to the Dow Jones Industrial Average, replacing AT&T Inc., which slumped 1.5 percent. Bank of America Corp. climbed 1.8 percent following government stress tests on financial companies.
The Standard & Poor’s 500 Index fell 1.3 percent to 2,074.53 at 1:25 p.m. in New York. The equity gauge is down 1.4 percent for the week. The Dow lost 271.19 points, or 1.5 percent, to 17,864.53. The Nasdaq Composite Index slipped 1 percent. Trading in S&P 500 companies was 12 percent above the 30-day average.
“Investors are looking and focusing entirely on what the Federal Reserve will do in the coming months,” Chad Morganlander, a money manager at St. Louis-based Stifel, Nicolaus & Co., which oversees about $170 billion, said by telephone. “Effectively good news in this data point supports the notion that they will raise rates in the not-too-distant future. That scotches the speculative fervor within the equity market.”
Employers added more jobs than forecast in February and the unemployment rate dropped to 5.5 percent, the lowest in almost seven years, showing the labor market is sustaining progress after the best annual performance in 15 years.
The 295,000 advance in payrolls last month followed a 239,000 January increase that was smaller than previously reported, figures from the Labor Department showed Friday in Washington. The median forecast in a Bloomberg survey of economists called for a 235,000 increase. The unemployment rate fell from 5.7 percent while hourly earnings rose less than forecast.
Rate Timing
The Fed has pledged patience on increasing borrowing costs, even as the economy improves. Fed Bank of San Francisco President John Williams, who votes on policy this year, said late Thursday that mid-year may be time for a “serious discussion” about raising interest rates as the labor market nears full employment and inflation rebounds. The central bank next meets on March 17-18.
“Everybody was waiting to see this number the Fed has been really clear saying everything is data dependent and this is one of the large data segments they’ve been looking at,” George Rusnak, co-head of global fixed income at Wells Fargo Investment Institute in Princeton, New Jersey, said by phone.
Attention is on the Fed’s definition of full employment as investors weigh the timing of rate increases. The February unemployment rate dropped to the lowest level since May 2008, and is now within the 5.2 percent to 5.5 percent range the central bank considers to be consistent with stable inflation.
Apple, AT&T
The S&P 500 is up less than 1 percent year to date, paring the 2.8 percent gain posted as the benchmark reached a record Monday. It has more than tripled during a bull market that hits its six-year anniversary on Monday.
Nine stocks fell for every one that rose in the S&P 500 as all 10 main groups declined. Each of the 30 stocks in the Dow slid, led by Procter & Gamble Co. and Johnson & Johnson.
The Chicago Board Options Exchange Volatility Index rose 11 percent Friday to 15.57. The gauge, know as the VIX, lost 36 percent in February for its biggest monthly decline on record.
Apple will be added to the Dow in the first reshuffling since September 2013, ending a banishment that kept the world’s largest company out for years before a stock split made its shares palatable to the price-weighted measure.
Broad Declines
The changes will push the number of technology-related companies in the 30-member gauge to six and boost their influence even more as the world’s largest company by market capitalization joins Microsoft Corp., Intel Corp., International Business Machines Corp., Cisco Systems Inc. and Visa Inc. AT&T is being kicked out after falling 4.5 percent in 2014. The changes will take effect with the start of trading on March 19.
Utility companies in the S&P 500 tumbled 3.2 percent while health-care and consumer-staples shares slid at least 1.6 percent. Financial stocks fell 0.5 percent, as Charles Schwab Corp. and E*Trade Financial Corp. rose at least 2.9 percent, offsetting declines in real-estate companies.
Bank of America gained 1.8 percent. The Fed said all 31 big banks subjected to a stress test have sufficient capital to absorb losses during a sharp and prolonged economic downturn. Bank of America was the only bank among the six largest to improve in every capital measure from its performance in last year’s test.
To contact the reporters on this story: Michelle F. Davis in New York at mdavis194@bloomberg.net; Oliver Renick in New York at orenick2@bloomberg.net
To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net; Jeff Sutherland at jsutherlan13@bloomberg.net John Shipman, Namitha Jagadeesh
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