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U.S. stocks little changed as S&P 500 gains for sixth quarter

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(Bloomberg) — U.S. stocks were little changed, with the Standard & Poor’s 500 Index heading for the longest stretch of quarterly gains since 1998, as investors assessed valuations before data that may show the economy is improving.

The S&P 500 slid less than 0.1 percent to 1,960.53 at 9:31 a.m. in New York. The equity benchmark gauge is up 4.7 percent this quarter, a sixth consecutive gain.

“We do have positive outlook for growth, we’re excited about earnings coming in, but it does make us nervous, the lack of volatility and the lack of activity,” Anna Rathbun, director of research for CBIZ Inc.’s retirement plan services unit in Cleveland, Ohio, said in a phone interview. The firm manages about $9 billion. “The low interest rates environment is a good breeding ground for asset bubbles. It feels like the calm before the storm.”

The S&P 500 trades at 16.6 times the projected earnings of its members, near its highest valuation in four years. It has added 6.1 percent this year and is 0.1 percent away from a record reached June 20.

The Chicago Board Options Exchange Volatility Index added 3.8 percent to 11.26 last week. The gauge, known as the VIX, is near its lowest level since February 2007. The S&P 500 has failed to post a gain or loss exceeding 1 percent for 50 straight days, the longest stretch since 1995.

Quarterly Rebalance

Investors should expect about $20 billion in selling of equities and some buying of bonds as pension-fund managers rebalance their portfolios at the end of the quarter, Boris Rjavinski, a strategist at UBS AG, wrote in a June 23 report.

More on this topic

Data at 10 a.m. in Washington may show that contracts to buy previously owned homes advanced at a faster pace last month. The National Association of Realtors’ index of pending home sales probably climbed 1.2 percent in May after a 0.4 percent increase in April, economists projected in a Bloomberg survey.

Business activity in the Chicago area probably expanded for a 14th straight month in June, economists predicted before a report at 9:45 a.m., New York time. The Institute for Supply Management-Chicago Inc.’s business barometer was at 63 this month after reaching 65.5 in May, according to the median forecast. Readings greater than 50 signal growth. Other reports this week will give further clues to the strength of the U.S. economy. Tomorrow brings data on manufacturing and auto sales, with the government’s payrolls report due on July 3 before the holiday weekend.

Economic Growth

U.S. equities have reached all-time highs as data from employment to housing fueled confidence that the U.S. economy is rebounding after the worst contraction in gross domestic product since 2009. Fed Chair Janet Yellen said on June 18 that accommodative monetary policy, rising property and equity prices and the improving global economy should lead to above-trend growth.

Investors will get a chance to assess the economy when companies start releasing financial results in July. Earnings for S&P 500 companies probably grew 5.2 percent during the second quarter while sales rose 3.2 percent, analyst estimates compiled by Bloomberg show. The forecasts are lower than they were at the beginning of April, when analysts projected earnings to rise 7.3 percent and sales to increase 3.7 percent.

“We’ve come a long way,” said Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, by phone. ’’Now, it’s an issue of prove to me that the market can keep getting higher based on continued earnings growth and growth in the economy.’’

–With assistance from Jacob Barach in New York.