Benchmark indexes retreated on the last trading day amid concern that fiscal and monetary policies may hamper growth in the world’s largest economy. All 10 main industries in the S&P 500 advanced for the week. Utilities jumped as investors snapped up high dividend-yielding equities. FedEx Corp. (FDX) soared 8.9 percent as quarterly profit beat estimates. UnitedHealth Group Inc. slipped 5.3 percent amid political wrangling over funding of the new health-care law.
The S&P 500 advanced 1.3 percent to 1,709.91 over the five days. The benchmark index has advanced 4.7 percent in September, rebounding from the biggest monthly drop since May 2012. The Dow Jones Industrial Average increased 75.03 points, or 0.5 percent, to 15,451.09. Both gauges on Sept. 18 surpassed their previous record highs set on Aug. 2.
“This week was good news for the people who wanted to keep the spigot open,” Tim Hartzell, who helps manage about $425 million as chief investment officer at Sequent Asset Management, said via phone from Houston. “The underlying data is not as robust as what many thought and may turn weaker despite five years of easy money, and stocks are dependent on this monetary stimulus.”
Stocks rallied as the Fed unexpectedly refrained from reducing its $85 billion in monthly asset purchases, saying it wants more evidence of an economic recovery. The decision emboldened bulls who have enjoyed a 153 percent rally in the S&P 500 since stimulus began five years ago.
Twenty-four of 41 economists surveyed Sept. 18-19 said the Fed will now wait until December before taking the first step to cut monthly bond purchases, according to a Bloomberg survey. The median estimate in an Aug. 9-13 poll projected the Fed would begin paring at the meeting that concluded Sept. 18.
“The decision was certainly a surprise and it shows that the Fed’s assessment of the economic recovery is weaker than they had previously let on,” Stephen Wood, the New York-based chief market strategist who helps oversee about $237 billion at Russell Investments, said by phone on Sept. 18. “In the near term, risk assets are going to like this.”
Equities slumped the most since August on the final day of the week as Fed Bank of St. Louis President James Bullard said a small tapering of bond buying is possible next month, and concern grew about political brinkmanship over federal spending. Government funding expires Oct. 1 and the Treasury is expected to exhaust its ability to borrow funds in mid-October, when it will hit the statutory debt limit.
“To steal a line from Shakespeare: Full of sound and fury, signifying nothing,” Tom Mangan, who helps oversee about $4.4 billion as a money manager at James Investment Research Inc. in Xenia, Ohio, said by phone. “There’ll be a lot of yelling and screaming, but I would be very surprised if they actually shut down the government. The market impact will be limited.”
Among economic reports during the week, the Conference Board’s index (TRAN) of leading economic indicators increased 0.7 percent in August. Industrial production rose last month by the most in six months and sales of previously owned homes unexpectedly climbed to the highest level in more than six years. Reports in the coming week on data from gross domestic product to consumer confidence and new home sales may help investors gauge the prospects for growth.
The U.S. economy will expand 1.6 percent this year, the slowest pace since the recession ended in 2009, and grow by 2.7 percent in 2014, according to economists surveyed by Bloomberg.
Stocks also rose early in the week after Lawrence Summers withdrew his bid to be Fed chairman and tensions over dealings with Syria’s chemical weapons eased. Summers would tighten policy more than Janet Yellen, who was his main rival to replace Ben S. Bernanke, according to a Bloomberg Global Poll of investors, analysts and traders.
The Chicago Board Options Exchange Volatility Index (VIX), the gauge of S&P 500 options prices known as the VIX, fell 7.3 percent to 13.12, the lowest since Aug. 14. The measure has declined 27 percent this year.
The Dow Jones Transportation Index jumped 2.6 percent, reaching an all-time high on Sept. 19. The Morgan Stanley Cyclical Index, which tracks shares in companies whose earnings are closely tied to economic growth, advanced 1.8 percent, also touching a record during the week.
Industrials, utility stocks and financial companies rose the most in the S&P 500, gaining at least 1.5 percent.
Boeing Co., the world’s largest planemaker, surged 4.8 percent to $116.63. Travelers Cos., the only property insurer in the Dow (INDU), climbed 3 percent to $86.06. American Express Co., the biggest U.S. credit-card issuer by purchases, rose 2.7 percent to $77.32.
Mining companies advanced with gold. Barrick Gold Corp. rose 5 percent to $18.61. Freeport-McMoRan Copper & Gold Inc. added 2.5 percent to $33.87. Gold futures gained 1.8 percent for the week, despite a plunge of 2.7 percent on the final day.
FedEx soared 8.9 percent to $116.83, the highest level since July 2007. The company, regarded as an economic bellwether because of the variety of goods it ships globally, deepened cuts in air capacity to Asia and moved more packages to cheaper shipping modes, combating a customer shift away from expensive delivery options and boosting quarterly profit.
An S&P index of 11 homebuilding stocks rallied 3.5 percent. D.R. Horton Inc. climbed 5.5 percent to $20.20. KB Home increased 3.9 percent to $17.63.
Utilities rallied 1.8 percent as Treasury yields sank the most since the five days ended July 12 and investors increased purchases of high dividend-yielding shares. Utility stocks pay 4.1 percent in dividends for the second-biggest payout among S&P 500 groups.
Apple Inc. rose 0.5 percent to $467.41. The company attracted long lines of shoppers at its retail stores for the global debut of its latest iPhones, in the company’s biggest move this year to stoke new growth. The stock slumped 6.7 percent last week after analysts criticized the new phone for lacking enough new features.
WellPoint Inc. tumbled 7.6 percent to $82.33 for the biggest retreat in the S&P 500. JPMorgan Chase & Co. analyst Justin Lake said it is among companies that would be most affected by any delay in the start of open enrollment in new health-care exchanges mandated by the Affordable Care Act.
The U.S. House voted on the last day of the week to finance the federal government through mid-December and choke off funding for President Barack Obama’s health-care law, setting up a showdown with the Senate and the White House.
UnitedHealth Group, the largest U.S. health insurer, lost 5.3 percent to $70.57 for the biggest decline in the Dow.
To contact the editor responsible for this story: Lynn Thomasson at firstname.lastname@example.org