S&P 500 Nears Record on Optimism Fed Will Support Economy

New York (Aug 20)  Bank of America Merrill Lynch Rates and Currency Research Head David Woo and Qorvis Mslgroup Executive Vice President of Communications Stanley Collender discuss the U.S. economy on “Bloomberg Surveillance.” (Source: Bloomberg)

U.S. stocks rose, with the Standard & Poor’s 500 Index trading within two points of a record, as Federal Reserve minutes indicated the central bank will continue to support the economy amid uneven gains in the labor market.

The S&P 500 added 0.2 percent to 1,986.22 at 2:57 p.m. in New York, approaching its previous closing high of 1,987.98. The Dow Jones Industrial Average rose 58.94 points, or 0.4 percent, to 16,978.53. Trading in S&P 500 (SPX) companies was 21 percent below the 30-day average for this time of the day.

“The Fed said if data points move toward their objectives faster than expected they’ll raise rates sooner than expected, that’s still a big ‘if’,” Todd Salamone, senior vice president of research at Cincinnati-based Schaeffer’s Investment Research, said via phone. “As the dust settles the market is supporting the idea that when you dig into the details, there’s not a whole lot to create a selloff or rally here.”

Fed officials came closer to agreement on an exit strategy from aggressive stimulus, while raising the possibility that it might occur sooner than anticipated, according to minutes of their July meeting.

The Fed is on pace to wind down its monthly bond purchases in October, while Chair Janet Yellen has said officials will keep the benchmark interest rate low for a “considerable time” after that. Yellen has committed monetary policy to stronger labor markets, which she measures with an array of indicators, so long as inflation remains in check.

The minutes said “many participants” still see “a larger gap between current labor market conditions and those consistent with their assessments of normal levels of labor utilization.”

Record Level

The S&P 500 rose to within less than 0.1 percent of an all-time high reached July 24 amid bets that the Fed will leave interest rates near zero for longer even as economic growth shows signs of accelerating.

Yellen will speak on labor markets Aug. 22 at the annual Fed Bank of Kansas City’s economic symposium that begins tomorrow in Jackson Hole, Wyoming. Policy makers including European Central Bank President Mario Draghi will also speak.

Three rounds of Fed stimulus and better-than-estimated corporate earnings have sent the S&P 500 higher by as much as 194 percent from its bear-market low on March 2009. The index has rebounded 3.8 percent since a three-month low on Aug. 7. The gauge tumbled as much as 3.9 percent from its all-time high on July 24 amid growing concern over global conflicts from Ukraine to Gaza and Iraq.

The S&P 500 has not had a decline of 10 percent in almost three years. The S&P 500 is trading at 17.8 times the reported earnings of its companies, near the highest level since 2010

Source: Bloomberg