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Portfolio > Economy & Markets

Stocks fluctuate after S&P 500 record on Fed rate comments

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U.S. stocks fluctuated after the Standard & Poor’s 500 closed at a record yesterday as the Federal Reserve promised to keep interest rates low amid signs of an economic recovery.

The S&P 500 lost 0.1 percent to 1,954.97 at 11:21 a.m. in New York. The benchmark equity index advanced for four straight days through yesterday. The Dow Jones Industrial Average fell 30.03 points, or 0.2 percent, to 16,876.59. Trading in S&P 500 companies was in line with the 30-day average for this time of day.

“People are really taking a more constructive view to see what happens with the market here going forward,” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said by phone. “I think you have to see if the trend continues.”

Global equities rallied yesterday after Fed Chair Janet Yellen said accommodative monetary policy, rising property and equity prices and the improving global economy should lead to above-trend growth. Yellen emphasized the need to put more Americans back to work and downplayed concerns about asset-price bubbles and incipient inflation.

The central bank reduced its bond purchases by $10 billion for a fifth consecutive meeting, to $35 billion, leaving it on schedule to end the program this year. The stimulus has helped the S&P 500 rally 189 percent from its bear-market low in March 2009.

‘Super Dove’

“Yellen is a super dove,” Lex Van Dam, a fund manager at Hampstead Capital LLP in London, said in an interview. “There remain very few alternatives for your cash other than putting it in stocks. The trend remains up in markets. I believe in the Fed. The economy has recovered on financial engineering.”

The benchmark index has climbed 7.7 percent since a low on April 11 as data showed the economy is recovering from the impact of extreme weather earlier this year. The gauge is trading at 16.5 times the projected earnings of its members, up from 15.5 times at the beginning of the year.

The index of U.S. leading indicators rose in May for the fourth straight month, according to data released today, showing the economy will gain momentum following the slowdown at the start of 2014. Fewer Americans filed applications for unemployment benefits last week, a sign of steady progress in the labor market.

Economic Data

The Federal Reserve Bank of Philadelphia’s factory index increased to 17.8 in June, topping economists’ forecasts. Readings greater than zero signal growth in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

The Chicago Board Options Exchange Volatility Index, known as the VIX, rose 0.1 percent to 10.62, after closing at the lowest level since 2007 yesterday. The measure of volatility has dropped 23 percent this year, and is within two points of its record low reached in 1993.

Six out of 10 main industries in the S&P 500 fell today, with technology, raw-materials and financial companies leading declines. Utilities advanced the most, with a gain of 0.5 percent.


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