The Standard & Poor’s 500 Index had its first weekly gain since Aug. 2 as investors weighed minutes of the Federal Reserve’s July meeting and economic data to gauge the prospect of monetary stimulus.
Microsoft Corp. rallied 9.3 percent as the world’s largest software maker said Chief Executive Officer Steve Ballmer will retire. Best Buy Co. jumped 16 percent after posting its biggest quarterly profit in more than two years. Hewlett-Packard Co., Abercrombie & Fitch Co. and Staples Inc. plunged more than 15 percent as earnings forecasts disappointed investors. Homebuilders slid 2.2 percent as a group as purchases of new U.S. homes plunged.
The S&P 500 added 0.5 percent to 1,663.5 for the five days, the first gain after two weeks of losses. The Dow Jones Industrial Average fell 70.96 points, or 0.5 percent, to 15,010.51. The 30-stock gauge declined for a third week, the longest retreat since November.
“Those who are not as invested in stocks still feel like they are missing something,” Richard Sichel, who oversees about $1.9 billion as chief investment officer at Philadelphia Trust Co., said by phone. “It comes down to the bottom line that interest rates may be going up a bit and they might want to get a little more into stocks.”
Almost all Fed policy makers agreed with plans to reduce the pace of monthly bond purchases if the economy continues to improve in line with forecasts, according to the central bank’s minutes released Aug. 21.
Despite the consensus shown in the Fed minutes, three central bank presidents speaking later in the week during the annual conference in Jackson Hole, Wyoming, differed over the timing for easing stimulus. One backed a tapering next month if the economy remains strong and two others said policy makers should take time to assess economic data.
Investors have been weighing whether the economy is strong enough to prompt the Fed to curb its $85 billion in monthly bond purchases. Reports during the week included data showing the fewest workers in more than five years applied for U.S. unemployment benefits over the past month while manufacturing in China unexpectedly improved, offsetting the worse-than-anticipated sales of new homes.
Three rounds of bond purchases by the Fed and better-than-forecast earnings have helped extend the bull market in U.S. equities to a fifth year, with the S&P 500 surging more than 150 percent from a 12-year low in 2009. The benchmark index reached a record high of 1,709.67 on Aug. 2 and has since lost 2.7 percent amid concern rising interest rates may derail an economic recovery. Ten-year Treasury yields approached the highest level in two years during the week.
Trading during the week was roiled twice by computer malfunctions that raised questions about the reliability of electronic markets. On Aug. 20, a programming error at Goldman Sachs Group Inc. caused unintended stock-option orders to flood American exchanges. Two days later, the Nasdaq Stock Market was prompted to halt trading in stocks and options for three hours because of a faulty connection between exchanges.
“It’s just another example of machines taking over and shutting things down,” Chris Willox, a Cobleskill, New York-based director of trading at Fenimore Asset Management Inc., said by phone. His firm manages about $1.7 billion. “It undermines confidence.”
The disruption resulted in the slowest week in at least five years, excluding periods surrounding holidays, with an average 5.1 billion shares trading over the five days, according to data Bloomberg began compiling in 2008.
The Chicago Board Options Exchange Volatility Index, or VIX, declined 2.7 percent to 13.98. The equity volatility gauge reached its highest level this year in June and has since dropped 32 percent.
Nine of 10 main industries in the S&P 500 gained, with consumer-staples companies the only group declining. Raw-materials and technology stocks rose the most, climbing at least 0.8 percent.
Microsoft rallied 9.3 percent, the most since 2009, to $34.75. Ballmer, who has struggled to adapt the company to the shift away from personal computers and toward mobile devices, plans to step down within 12 months. Microsoft, which supplies the software running most PCs, lost almost half its value on Ballmer’s watch.
Best Buy surged 16 percent to $35.08. The world’s largest consumer-electronics retailer reported a profit of $266 million in the quarter ended Aug. 3 as Chief Executive Officer Hubert Joly trimmed costs and cut prices to spur sales.
Hewlett-Packard plunged 15 percent, the largest drop in two years, to $22.40. Chief Executive Officer Meg Whitman rescinded a projection for growth in fiscal 2014 as ebbing demand for PCs and lower business spending hamper her turnaround efforts.
Abercrombie & Fitch sank 20 percent to $38.68. The clothing retailer forecast profit for the current quarter that was less than analysts estimated amid declining traffic at its stores. Chief Executive Officer Mike Jeffries has been struggling to reconnect with the clothing chain’s teenage customers who have become less enamored of Abercrombie’s fashions.
Staples tumbled 16 percent to $14.20. The world’s largest office-supplies chain reduced its annual profit forecast because of declines in its retail and international business.
The S&P Supercomposite Homebuilding Index fell 2.2 percent as all of its 11 members retreated. Purchases of new U.S. homes plunged 13 percent in July, the most in more than three years, raising concern higher mortgage rates will slow the real-estate rebound.
Lennar Corp. slipped 3.8 percent to $32.60 while D.R. Horton Inc. lost 1.4 percent to $18.73.