U.S. stocks fell, after the Standard & Poor’s 500 Index had its best month since February, as energy producers sank with the price of crude to offset data showing U.S. manufacturing expanded at the fastest pace in three years.
The S&P 500 lost 0.1 percent to 2,002.09 at 4 p.m. in New York, trimming earlier losses of 0.4 percent in afternoon trading. The Dow Jones Industrial Average slipped 32.76 points, or 0.2 percent, to 17,065.69. The Nasdaq Composite Index rose 0.4 percent, extending its highest level since March 2000.
“The 2,000 area is still in play, and we’ve yet to move past it convincingly as it remains a speed bump in the short term,” Joe Bell, senior equity analyst at Cincinnati-based Schaeffer’s Investment Research Inc., said by phone. “The manufacturing index was better than expected, but after that strong rally we had through much of August, the market is taking a bit of a breather.”
The Institute for Supply Management’s manufacturing index unexpectedly climbed to 59, the highest level since March 2011, from July’s 57.1, the Tempe, Arizona-based group reported today. Readings greater than 50 indicate growth. The median forecast in a Bloomberg survey of economists was 57.
The news on manufacturing was less positive overseas as U.K. factory growth slowed more than forecast last month and Italian manufacturing shrank as Europe suffered the fallout from weakening demand and mounting geopolitical risks. Output growth in China also slowed.
The S&P 500 jumped 3.8 percent in August, climbing above 2,000 for the first time, amid improving economic data and speculation the Federal Reserve will keep interest rates low even as the economy shows signs of strengthening. The gauge has advanced 8.1 percent in 2014.
The economy expanded more than previously forecast in the second quarter, propelled by the biggest gain in business investment in more than two years, the Commerce Department reported last month. A Labor Department report on Sept. 5 will show payrolls rose by more than 200,000 in August for a seventh- straight month, a Bloomberg survey of economists showed.
“Overall, data supports the idea that the economy is accelerating going into the second half of the year, which certainly helps the equity markets,” Kevin Caron, who helps oversee $170 billion at Stifel Nicolaus & Co. in Florham Park, New Jersey, said in a phone interview. “You’ve had investors who have been increasingly encouraged by the direction of the data in the economy. They’ve been discouraged from holding assets in low-yielding, safer assets.”
Slowest Trading Since 2008
Equity gains at the end of the month came amid the slowest trading in at least six years. Volume was below 5 billion shares in each of the last eight days of August, the longest stretch in data compiled by Bloomberg going back to 2008.
The S&P 500’s rally isn’t over and the gauge could jump 50 percent more by 2020 as the U.S. economic recovery heads for a record winning streak, according to Morgan Stanley.
A slower though sustained period of growth could help the equity benchmark gauge peak near 3,000, according to a report today. The world’s largest economy, which began recovering in July 2009, may continue growing for five years or more, making it the longest period of expansion, Morgan Stanley said.
In Ukraine, the government warned of an escalating conflict in its easternmost regions, even as U.S. President Barack Obama headed to eastern Europe to reassure NATO members. Ukraine and its allies in the U.S. and Europe accuse Russia of dispatching troops and backing separatist militias to open a new front in the conflict. Russia has repeatedly denied involvement in the unrest.
“U.S. investors will try to focus on the economic agenda of the day, while geopolitical issues remain in the background,” Stephane Ekolo, chief European strategist at Market Securities in London, wrote in an e-mail.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P options prices known as the VIX, rose 3.8 percent to 12.44. The gauge lost 29 percent in August, the biggest monthly drop in almost three years.
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