No volume? No volatility? No problem.
U.S. stocks churned higher in the slowest week of trading since New Year’s and the tightest range for equities in six months, as comments from the Federal Reserve boosted speculation interest rates won’t rise too soon or too quickly to snuff out economic growth.
The Standard & Poor’s 500 Index added 0.2 percent, closing at records on two of the five days. The gauge slumped Friday in the final half hour of trading before the Memorial Day weekend. The Dow Jones Industrial Average slipped 0.2 percent, fading on the final day after taking out its March 2 all-time high on Monday. The Nasdaq Composite Index added 0.8 percent to within three points below its record.
Volatility and volume are dwindling in stocks even as the Fed weighs the first increase in borrowing costs since 2006 amid signs of tepid economic growth. While some investors say fresh highs and the return of calm are signs of complacency, others say the Fed’s stimulus will continue to boost equities until economic growth is more robust.
“We are going to see a gradual story unfold from the Fed and that kind of information is going to be calming,” Sandy Lincoln, the Chicago-based chief market strategist in the U.S. with BMO Global Asset Management, said in a phone interview. The firm oversees $249 billion. “That’s been baked in right now and that’s what investors are counting on.”
Stock trading was the slowest since the start of 2015, with an average of 5.6 billion shares changing hands on U.S. exchanges over the five days. The S&P 500’s lowest close in the week was only five points from its highest, the tightest range since November. The Dow average hasn’t seen a 100-point intraday swing for six days, the longest stretch in almost a year.
Stocks advanced as minutes of the Fed’s April meeting signaled officials are unlikely to raise rates in June even as policy makers anticipate growth will accelerate after stalling in the first quarter. Chair Janet Yellen said Friday that while she expects to raise borrowing costs this year, the pace of further increases will be gradual.
Economic reports were mixed over the week. Jobless claims over the past month fell to a 15-year low, while factory data showed continued signs of weakness in manufacturing. New-house construction surged to the highest since 2007, while sales of existing homes unexpectedly fell.
The Chicago Board Options Exchange Volatility Index fell Thursday to its lowest level this year. The gauge, known as the VIX, capped its second week of losses, falling 2 percent.
“The market is getting more complacent and less concerned about risk,”said Eric Schoenstein, co-portfolio manager of the $5.5 billion Jensen Quality Growth Fund from Lake Oswego, Oregon. “We’re at new highs in the S&P over and over, maybe not every single day, but on a upward trend without there being much in a way of fundamental data to provide a good backdrop as to why it should continue to be at all-time highs.”
One group of stocks not keeping up with the market is airlines and shippers. The Dow Jones Transportation Average fell 2.3 percent, sinking to the lowest level since October. The drop extended its loss this year to 7.2 percent, underperforming the Dow industrials by nearly 10 percentage points.
The Bloomberg U.S. Airlines Index tumbled 10 percent in the week amid signs that a year of lower fuel costs has left them poised to ramp up competition for customers with cut-rate fares and more routes.
Deal speculation boosted shares of the biggest cable providers, after an agreement by Europe’s Altice SA to acquire control of Suddenlink Communications spurred bets there may be more takeovers in the industry.
Cablevision Systems Corp. jumped 22 percent for the biggest gain in the S&P 500, while Time Warner Cable Inc. added 9.4 percent.
Six of the 10 main S&P 500 groups rose, with none gaining more than 0.9 percent. CVS Health Corp. paced gains in health stocks, rallying after it agreed to buy the nursing-home pharmacy Omnicare Inc.
Wal-Mart Stores Inc. dropped 4.3 percent to lead consumer staples shares lower after its profit missed estimates. Other results were mixed, as Hewlett-Packard Co. gained 3.5 percent on better-than-forecast profit, while NetApp Inc. sank the most since October after revenue and earnings missed predictions.