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updated: 9/6/2013 10:05 AM

Weak jobs report, Syria tensions whipsaw markets

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Associated Press

NEW YORK -- The stock market lurched between gains and losses in morning trading Friday as investors held out hope for more economic stimulus from the Federal Reserve and closely monitored the escalating tensions between the U.S. and Syria.

A weak U.S. jobs report for August bolstered hopes that the Fed may hold off on cutting back on its massive bond-buying program when it meets later this month.

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Stocks started slightly higher, then moved sharply lower after the first 10 minutes of trading as traders worried about the standoff in Syria. Russian media reported that naval ships were en route to Syria, raising worries of a wider conflict.

The Dow Jones was down 31 points, or 0.2 percent, at 14,905 as of 10:50 a.m. Eastern. It was up 52 points shortly after trading began, then dropped as much as 148 in the first half-hour of trading before recovering much of its loss.

The Standard & Poor's 500 index was up a fraction of a point at 1,655 and the Nasdaq composite was unchanged at 3,658.

Traders moved money back into U.S. government bonds on speculation that the weak employment numbers would encourage the Federal Reserve to keep buying bonds. The yield on the 10-year Treasury note fell to 2.90 percent from 3 percent the day before, a big move for the bond market.

Wall Street was rattled by signs that the confrontation between the U.S. and Syria over Syria's alleged use of chemical weapons on civilians was getting worse. Three Russian naval ships were sailing toward Syria in the eastern Mediterranean on Friday and a fourth was on its way, the Interfax news agency reported, a sign that Russia may assist Syria in case the U.S. does strike.

"These are troubling developments," said David Chalupnik, head of equities for Nuveen Asset Management. "Syria is turning into something bigger that what it started out to be."

The price of crude oil rose as traders anticipated that any escalation of tensions in the Middle East might disrupt the flow of oil from the region. Oil rose $1.58 to $109.95 a barrel. Gold rose $14 to $1,386 an ounce as investors parked money in safe-play assets.

In Washington, the Labor Department reported that U.S. employers added 169,000 jobs last month, fewer than the 177,000 economists had forecast. It also revised downward the number of jobs added in July to 104,000, from its previous estimate of 162,000.

The government also said the unemployment rate fell to 7.3 percent from 7.4 percent, but the decline mainly reflects the fact that more Americans gave up on looking for work, which means they are no longer counted as unemployed. The proportion of Americans working or looking for work fell to its lowest level in 35 years.

"This was a horrible set of jobs figures, starting with large revision to last month's number," Tom di Galoma, head of fixed-income rates sales at ED&F Man Capital, wrote in a note emailed to clients.

Friday's jobs survey is the last major piece of economic data the Federal Reserve will have to consider before the central bank's September policy meeting, where it will decide the fate of its large bond-buying program.

The Fed has been buying $85 billion in Treasuries and other bonds since last September in an effort to keep interest rates low and encourage hiring and economic growth. It was widely believed that the Fed would start pulling back on the purchases this month, barring a disappointing jobs report.

In corporate news, Mattress Firm sank after the company reported second-quarter earnings of 43 cents a share, far below the 51 cents analysts expected, according to FactSet. Mattress Firm plunged $5.92, or 14 percent, to $35.91.

VeriFone Systems reported a third quarter loss on Thursday, but the results still came in above Wall Street expectations. The electronic payment terminal maker surged up $2.14, or 10 percent, to $22.86.

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