S&P 500 Climbs to 2-Week High as Slow Retail Sales Fuel Fed Bets

Wednesday, 13 Aug 2014 04:30 PM

 

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U.S. stocks rose, pushing the Standard & Poor’s 500 Index to a two-week high, as a slowdown in retail sales boosted speculation the Federal Reserve won’t be forced to raise rates sooner than anticipated.

The S&P 500 gained 0.7 percent to 1,946.68 at 4 p.m. in New York, the highest since July 30. The Dow Jones Industrial Average climbed 91.13 points, or 0.6 percent, to 16,651.67, also the highest in two weeks.

“There is some feeling that events overseas are beginning to cool down a little bit but also the retail numbers might suggest that the Fed is not going to be so aggressive in raising rates any time soon,” Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., said. “That has been the backbone of the market for the past five years.”

Retail sales were little changed in July, the worst performance in six months, as car demand slowed and tepid wage growth restrained U.S. consumers. The slowdown in purchases followed a 0.2 percent advance in June, the Commerce Department reported today in Washington.

Recent data have shown U.S. gross domestic product expanded at a 4 percent annual pace in the second quarter, confirming the Fed’s view that a first-quarter contraction was transitory. Employers in the U.S. added more than 200,000 jobs for a sixth straight month in July, the longest such period since 1997.

Considerable Time

The economic strength had created concern that the Fed may be forced to act on rates sooner than anticipated, as the central bank remains on pace to wind down its monthly bond purchases in October. Fed Chair Janet Yellen has said officials will keep its benchmark low for a “considerable time” after the bond buying ends.

Three rounds of Fed bond purchases and record-low interest rates have helped push stocks higher by as much as 194 percent from a bear-market low in 2009.

The S&P 500 last closed at a record on July 24 before tumbling 3.9 percent on concerns that geopolitical crises from Ukraine to Israel and Iraq could derail the global economy.

In Iraq, Kurdish forces fought to retake positions overrun last week by Islamic State fighters in the northern part of the country, while a political standoff between President Fouad Masoum and Prime Minister Nouri al-Maliki continued.

Ukrainian officials said today they’d refuse entry to a truck convoy that Russia says is loaded with humanitarian assistance for rebel-held eastern areas, while pledging to send their own aid to the embattled region.

“The many geopolitical issues are a little quieter or on the back burner at the moment,” Richard Sichel, chief investment officer at Philadelphia Trust Co., said. “It’s given investors an opportunity to take a look and see if they want to add to positions, and it looks like that’s what they’re doing today.”


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