Updated December 1 at 11:01am

S&P 500 climbs toward record amid bets Fed will keep rates low

U.S. stocks rose, sending the Standard & Poor’s 500 Index to within three points of an all-time high, amid speculation the Federal Reserve will continue to support low interest rates as the economy recovers.

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S&P 500 climbs toward record amid bets Fed will keep rates low


NEW YORK – U.S. stocks rose, sending the Standard & Poor’s 500 Index to within three points of an all-time high, amid speculation the Federal Reserve will continue to support low interest rates as the economy recovers.

The S&P 500 added 0.2 percent to 1,985.41 at 1:36 p.m. in New York, approaching a closing record of 1,987.98. The Dow Jones Industrial Average rose 47.17 points, or 0.3 percent, to 16,966.76. Trading in S&P 500 companies was 27 percent below the 30-day average for this time of the day.

“I think the consensus hope is that a dovish tone will prevail and I think that’s causing the market to at least stabilize and see a little bit of a bump up here,” Sean Lynch, the Omaha, Neb.-based managing director of global equity strategy and research for Wells Fargo Private Bank, said via phone. “We had strong macroeconomic fundamentals, good data around housing, and a dovish policy wouldn’t hurt.”

The S&P 500 is within about 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.

Investors will scrutinize the minutes from the July 29-30 Fed meeting, due at 2 p.m. in Washington, to gauge whether improving economic data has made policy makers more inclined to pull forward the timing of any rate increase. The Fed remains on pace to wind down its monthly bond purchases in October, while Fed Chair Janet Yellen has said officials will keep the benchmark interest rate low for a “considerable time” after that.

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

“Fed minutes reaffirming confidence is what we are looking for,” Justin Urquhart Stewart, who helps oversee about $7 billion at Seven Investment Management LLP in London, wrote in an email. “What we don’t want to see is any significant movement up or down, but rather something showing continued steady growth in the economy.”

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 4 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.

Retail earnings

Hewlett-Packard Co. and Target Corp. are among the six S&P 500 companies reporting earnings on Wednesday. Stocks rallied Tuesday as retailers including Home Depot Inc. and TJX Cos. led gains on better-than-projected results.

Staples Inc. declined 2.5 percent to $11.34. The world’s largest office-supply chain will shut about 140 locations this year, part of a store-closing plan announced earlier, as the retailer responds to online competition.

J.M. Smucker Co. fell 1.5 percent to $101.88 after the maker of peanut butter and fruit spreads reported earnings that missed analysts’ estimates, citing slow sales of consumer foods and coffee.

“With multiples getting pushed up to full value, the market is starting to demand earnings-driven returns and top-line growth and they’re going to be a little more critical of earnings as a result,” Leo Kelly, the Hunt Valley, Md.-based partner and CEO of HighTower’s Kelly Wealth Management, said in a phone interview.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P options prices known as the VIX, declined 2.5 percent to 11.91. The gauge has lost 13 percent this year.

Industrial stocks gained 0.9 percent, the most among 10 groups in the S&P 500. Southwest Airlines Co. advanced 2.2 percent to $31.42 and Cummins Inc. jumped 2.6 percent to $147.33.

International Rectifier Corp. soared 47 percent to $39.11. Infineon Technologies AG, Germany’s largest chipmaker, agreed to buy the company for about $3 billion in cash.

Hertz Global Holdings Inc. slumped 9.8 percent to $28.47 after saying its full-year results will miss the low end of its forecast. The company said its performance is being hurt by a record number of auto recalls, higher-than-expected operating expenses in the U.S. rental-car market and sluggish demand for its equipment business.

The car- and equipment-rental company, which is splitting in two, has yet to report financial results from the first or second quarters. It has delayed earnings reports at least four times since it uncovered accounting errors and said it can no longer rely on its past three years of financial statements.


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