U.S. stocks rose, paring the Standard & Poor’s 500 Index’s first weekly decline in almost two months, as Federal Reserve Chairman Ben S. Bernanke said he saw “scope for further action,” increasing speculation the central bank will act to boost economic growth.
Nine out of 10 groups in the S&P 500 rose, as consumer discretionary, industrial and technology stocks erased earlier losses. QEP Resources Inc. (QEP:US) jumped 6.1 percent for the biggest gain in the benchmark gauge for U.S. stocks after agreeing to buy North Dakota oil assets. Watson Pharmaceuticals (WPI:US) Inc. climbed 5.7 percent as its generic painkiller Lidoderm got approval from the Food and Drug Administration.
The S&P 500 added 0.6 percent to 1,410.86 at 3:31 p.m. New York time. The gauge is down 0.5 percent for the week. The Dow Jones Industrial Average rose 95.13 points, or 0.7 percent, to 13,152.59 today. Trading in S&P 500 companies was 20 percent below the 30-day average at this time of day.
“It was confirmation of Bernanke’s commitment to potentially do something more if the economy appears it needs it,” John Carey, who helps oversee about $220 billion at Pioneer Investments in Boston, said in a telephone interview. “That was reassuring to people who might have thought he was stepping back from that.” He said, “It’s summer trading and volume is light so it doesn’t take much to move the market. A little whiff of positive news was enough.”
The S&P 500 has advanced for the past six straight weeks amid optimism that global central banks will take actions to stimulate growth. At the same time, trading volume and volatility have dropped this month as vacationing traders await policy clues from the Fed’s annual summit in Jackson Hole, Wyoming, and a European Central Bank meeting in September.
“There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery,” Bernanke said in an Aug. 22 letter to California Republican Darrell Issa, the chairman of the House Oversight and Government Reform Committee.
Minutes from the Federal Open Market Committee’s July 31- Aug. 1 meeting showed many members judged that more stimulus “would likely be warranted fairly soon” unless the pace of the recovery picks up. Bernanke will have an opportunity to clarify his views in his Aug. 31 speech at Jackson Hole, where he signaled a second round of bond buying in 2010.
A report earlier today showed demand for U.S. capital goods such as machinery and communications gear dropped in July by the most in eight months, indicating companies are pulling back on investment. Bookings for non-military capital equipment excluding planes slumped 3.4 percent, the Commerce Department report showed.
Global stocks fell earlier as two central bank officials said ECB President Mario Draghi may wait until Germany’s Constitutional Court rules on the legality of Europe’s permanent bailout fund before unveiling full details of his plan to buy government bonds. With the court set to rule on Sept. 12, investors looking for Draghi to announce a definitive program at his Sept. 6 press conference might be disappointed, according to the officials.
Angela Merkel said at a joint press conference with Greek Prime Minister Antonis Samaras that Germany is ready to help the Greek government as it takes the necessary steps to resolve his country’s economic woes. Samaras will go to Paris for a meeting with French President Francois Hollande tomorrow after concluding his visit to Berlin today.
“It’s a resilient market,” Walter Todd, who oversees about $930 million as chief investment officer of Greenwood Capital in Greenwood, South Carolina, said in a telephone interview. “When you think that losses will accelerate, the market rallies back.” He said, “It’s just a very difficult environment to read.”
The S&P 500 has struggled to break out of a narrow trading range as price swings in the index have averaged 0.66 percent a day since Aug. 6, the smallest fluctuation over any comparable periods since January 2011, according to data compiled by Bloomberg. The index has hovered above 1,400 since Aug. 7, and failed to stay above a four-year high of 1,419.04 after briefly surpassing it on Aug. 21.
The Chicago Board Options Exchange Volatility Index, known as the VIX (VIX), fell 3.3 percent to 15.44 today. It has lost 42 percent since June 1 and touched 13.45 on Aug. 17, its lowest level since 2007.
The Morgan Stanley Cyclical Index, a gauge of 30 U.S. stocks tied to economic growth, rose for the first time in five days, adding 0.4 percent. Sears Holding Corp. led gains in the measure, rising 3.8 percent to $56.50. Masco Corp. (MAS:US), a home improvement and building products maker, advanced 1.7 percent to $14.16.
Nine out of 10 groups in the S&P 500 gained at least 0.3 percent, with telephone stocks rising the most. Consumer discretionary (S5COND) companies climbed 0.8 percent, after earlier falling as much as 0.2 percent. Industrial stocks added 0.5 percent after losing 0.4 percent. Technology stocks erased a 0.6 percent decline, advancing 0.5 percent.
QEP Resources rallied 6.1 percent to $28.83. The explorer (QEP:US) spun off from Questar Corp. in 2010 agreed to buy North Dakota oil assets from companies including Sundance Energy Australia Ltd., expanding its Williston Basin acreage by 30 percent.
Watson Pharmaceuticals advanced 5.7 percent to $83.09 after the Parsippany, New Jersey-based generic-drug maker said in a statement after the market close yesterday that its generic version of Lidoderm received approval from the FDA and it is planning on launching the product in September 2013.
Eli Lilly & Co. (LLY:US) added 3 percent to $43.68 as the company said its experimental Alzheimer’s treatment slowed the decline of cognition in some patients even though it failed to meet the primary goals of two large studies.
Autodesk Inc. (ADSK:US) plunged 16 percent to $30.02 for the biggest drop in the S&P 500 after the software maker lowered its annual sales forecast and said it plans to cut jobs as it restructures to focus on cloud and mobile computing.
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