S&P 500 poised for longest monthly gain since March on Bernanke

THE S&P 500 INDEX rose toward its longest monthly gain since March as Federal Reserve Chairman Ben S. Bernanke called the current U.S. jobless rate a "grave concern" and said he wouldn't rule out stimulus.
Posted 8/31/12

NEW YORK - The Standard & Poor’s 500 Index rose toward its longest monthly rally since March as Federal Reserve Chairman Ben S. Bernanke said he wouldn’t rule out more steps to lower a jobless rate he described as a “grave concern.”

Equities pared gains after S&P downgraded Spain’s Catalonia region to junk status. Newmont Mining Corp., the largest U.S. gold producer, added 2.8 percent as the metal climbed the most in a week on speculation the Fed will stimulate the economy. US Airways Group Inc. rallied 2.9 percent as it signed a pact with bankrupt American Airlines to evaluate a potential merger.

The S&P 500 rose 0.4 percent to 1,404.66 at 12:29 p.m. in New York, after gaining as much as 1 percent earlier. The index has climbed 1.8 percent in August and is on pace for its third straight monthly advance. The Dow Jones Industrial Average added 71.74 points, or 0.6 percent, to 13,072.45 today. Trading in S&P 500 companies was down 16 percent from the 30-day average at this time of day.

“It’s the strongest language on unemployment I remember Bernanke using,” said Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private- banking unit of KeyCorp in Cleveland. “That makes the next jobs report even more critical. If it deviates significantly from muddling along, they may well be forced to act.”

Bernanke’s speech at an annual forum in Jackson Hole, Wyo. comes two weeks before he leads a meeting of the Federal Open Market Committee to decide whether an expansion of the Fed’s record stimulus is needed to spur growth. Two rounds of large-scale asset purchases have failed to reduce the jobless rate below 8 percent more than three years into the recovery.

No improvement

“We have seen no net improvement in the unemployment rate since January,” Bernanke told the audience, according to a text of his remarks released in Washington. “Unless the economy begins to grow more quickly than it has recently, the unemployment rate is likely to remain far above levels consistent with maximum employment for some time.”

Since the August FOMC meeting, data on housing, manufacturing and retail sales have exceeded expectations. Yet data today showed that business activity in the U.S. expanded at a slower pace in August, indicating companies may hold the line on production until sales pick up.

Bets on further policy actions have driven the S&P 500 near a four-year high in August. If history is any guide, the index may extend gains next month, according to a Bespoke Investment Group study. Going back to 1928, the index has returned an average 0.12 percent in September when it has been up year-to- date through August, the data showed. The measure has risen 12 percent so far in 2012.

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