LCG London Cap

By Tommy Stubbington and Saumya Vaishampayan 

U.S. stocks limped into October, following the worst quarter for benchmark indexes since 2011.

The Dow Jones Industrial Average fell 92 points, or 0.6%, to 16192, after rising shortly after the opening bell. The S&P 500 lost 0.3% and the Nasdaq Composite fell 0.6%.

The Stoxx Europe 600 slipped 0.4%, giving up earlier gains.

Stocks fell around the globe in the third quarter, driven by renewed fears of slowing growth in China and uncertainty over the U.S. Federal Reserve's plan to raise interest rates. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite suffered their worst quarterly percentage losses in four years.

The coming earnings season may not provide much relief for stocks, as companies continue to grapple with an economic slowdown and low oil prices weigh on energy-company earnings. Analysts expect a fall in S&P 500 earnings for the third quarter, on the heels of a decline in second-quarter profits. If the third-quarter earnings pullback materializes, it would mark the first time since 2009 that earnings fell for two straight quarters, according to FactSet.

Ralph Bassett, head of North American equities at Aberdeen Asset Management, said he has been more cautious recently about buying stocks that have fallen, given the uncertain outlook for earnings.

"Do you really want to continue to add on weakness given the lack of visibility?" he said. "Typically, it's our nature to add on weakness, but you need to have conviction that it's going to work out over the medium term," he added.

Economic reports in the U.S. were mixed Thursday.

U.S. manufacturers expanded at the slowest pace in more than two years in September, according to the Institute for Supply Management. The ISM's manufacturing purchasing managers index slipped to 50.2, the lowest level since May 2013, from 51.1 in August. Economists had expected the index to fall to 50.8.

U.S. employment data remained consistent with an improving labor market. Initial jobless claims, a proxy for layoffs, rose by 10,000 to 277,000 in the week ended Sept. 26, the Labor Department said Thursday. Economists had expected 271,000 new claims.

There were tentative signs that a slowdown in China's manufacturing sector may be bottoming out.

China's official manufacturing purchasing managers index ticked up slightly to 49.8 in September, beating expectations. A private gauge of nationwide manufacturing activity, the Caixin China manufacturing PMI, was down slightly at 47.2 in September, a six-year low, compared with 47.3 in August.

In the eurozone, manufacturing data showed the pace of expansion slowed slightly in September.

"Much of the uncertainty is already in the price. Investors are well aware of the impending economic slowdown," said Jeremy Batstone-Carr, chief economist and strategist at London-based brokerage and wealth manager Charles Stanley. "I'd be concerned about sounding the all clear, particularly as we head into the reporting season," he said.

Asian markets extended gains after the economic data was released. Japan's benchmark Nikkei Stock Average climbed 1.9%. Investors in Japan also considered the Bank of Japan's latest corporate survey, which showed that big manufacturers were more cautious about the economy in the third quarter as exporters were pressured by China's economic slowdown.

Markets in China and Hong Kong were closed for national holidays.

Investors were looking ahead to Friday's U.S. jobs report, which is closely watched by Fed officials as they decide when to raise short-term interest rates. The Fed's decision to hold rates at record lows in September helped fuel fears of slowing global growth.

On Thursday, Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, said an October rate increase is possible.

Economists expect 200,000 jobs were created in September and estimate that the unemployment rate held at 5.1%.

In commodities, U.S. crude-oil futures added 0.6% to $45.36 a barrel, giving up earlier gains. Gold was flat at $1,114.80 an ounce.

The yield on the 10-year Treasury fell to 2.024%, compared with 2.061% on Wednesday. Yields fall as prices rise.

Riva Gold contributed to this article.

Write to Tommy Stubbington at tommy.stubbington@wsj.com and Saumya Vaishampayan at saumya.vaishampayan@wsj.com

(END) Dow Jones Newswires

October 01, 2015 11:49 ET (15:49 GMT)

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