Dow Average Rises to Record as Fed Sees Improving Economy
U.S. stocks advanced, sending the Dow Jones Industrial Average to a record, after the Federal Reserve said the economy is gaining momentum. Treasuries rose and the dollar dropped as the central bank signaled low rates would persist for a “considerable time.”
The Standard & Poor’s 500 Index (SPX) added 0.3 percent at 4 p.m. in New York, capping a third straight monthly gain. The Dow average erased its loss for the year to close at an all-time high of 16,580.84. Yields on 10-year Treasury notes fell five basis points to 2.64 percent. The Bloomberg Dollar Spot Index, which monitors the greenback against 10 major counterparts, fell 0.3 percent. The S&P GSCI gauge of 24 commodities sank 1 percent as oil slid below $100 a barrel.
“The Fed delivered on expectations in every conceivable way,” said Christopher Sullivan, who oversees $2.3 billion as chief investment officer at United Nations Federal Credit Union in New York. “Those who thought the Fed would be more concerned about the earlier weakness in the year are disappointed.”
The central bank said it would continue to trim the pace of bond purchases and that the economy is gaining momentum as consumers spend more. Data earlier today indicated economic growth in the U.S. stalled in the first quarter as harsh winter weather chilled business investment, exports dropped and inventories climbed at a slower pace. Consumer spending on services rose by the most in 14 years.
“Growth in economic activity has picked up recently, after having slowed sharply,” the Federal Open Market Committee said today in a statement following a meeting in Washington. “Household spending appears to be rising more quickly.”
The S&P 500 closed within seven points of its record of 1,890.90 reached April 2. The gauge advanced 0.6 percent in April after rising 0.7 percent in March. It has added 1.9 percent so far in 2014.
The MSCI Emerging Markets Index dropped 0.5 percent today, trimming its monthly advance to 0.1 percent. Russia’s equity gauge slid 4.6 percent for a fourth straight monthly drop.
The S&P commodities gauge had its worst day since April 1, paring its gain this month to 0.6 percent. Nickel jumped 15 percent in April, the most since September 2012, on concern tensions between Russia and Ukraine will curb supply. Arabica coffee, Starbucks Corp.’s favorite bean, touched a 26-month high this month as a drought in Brazil ravaged the crop. West Texas Intermediate crude prices dropped 1.8 percent in April, the most in five months.
In the Treasury market, a rally in 30-year bonds sent yields down 10 basis points in the month to 3.46 percent, while 10-year yields lost seven basis points. The Bloomberg U.S. Dollar Spot Index was 0.8 percent lower in April for a third monthly loss, its longest slump since 2011.
Fed Chair Janet Yellen is winding down record stimulus as the world’s largest economy shows signs of recovering from a first-quarter standstill. At the same time, the Fed repeated that it’s likely to keep the benchmark interest rate near zero for a “considerable time” after bond purchases end.
The committee pared monthly asset buying to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely.
U.S. gross domestic product grew at a 0.1 percent annualized rate from January through March, compared with a 2.6 percent gain in the prior quarter, the data showed. The median forecast of 83 economists surveyed by Bloomberg called for a 1.2 percent increase.
The pullback in growth came as snow blanketed much of the eastern half of the country, keeping shoppers from stores, preventing builders from breaking ground and raising costs for companies including United Parcel Service Inc.
“The Fed seems to be putting aside the weakness in the first quarter that the market reacted to this morning,” Walter Todd, who oversees about $975 million as chief investment officer at Greenwood Capital Associates LLC, said in a phone interview. “The statement seems business as usual, and perhaps if you’d seen the Fed react more dovish to a weaker first quarter, that would’ve been more negative.”
Among U.S. stocks that moved today, Pepco Holdings Inc. climbed 17 percent after Exelon Corp. agreed to buy it and Twitter Inc. (TWTR) dropped 8.6 percent after saying user growth slowed. EBay Inc. (EBAY) fell 5 percent as the biggest online marketplace forecast sales that trailed some analysts’ estimates.
The Dow’s previous record was 16,576.69, reached on the last day of 2013. The 30-stock gauge fell 7.3 percent from New Year’s through Feb. 2 amid concerns turmoil in emerging markets such Turkey and Argentina would slow global growth. Since then it has rebounded 7.8 percent, led by an advance of 17 percent in Johnson & Johnson and gains of 14 percent each in Caterpillar Inc., Exxon Mobil Corp. and International Business Machine Corp.
The S&P 500 is within 0.4 percent from a record. Its 8.2 percent recovery from a low of 1,741.89 on Feb. 3 has been led by a 14 percent rally energy stocks and increases of 11 percent each in industries least tied to economic growth: utilities and home-product makers. The gauge’s best-performing stock since the 2014 bottom is Nabors Industries Ltd., a drilling contractor, which is up more than 50 percent.
Investors added $3.1 billion to U.S. equity exchange-traded funds yesterday, the biggest single-day inflow since April 8, data compiled by Bloomberg show. Health-care stocks absorbed the most money among industry ETFs, taking in $177 million and paring its five-day net outflow to $399 million.
NQ Mobile Inc. (NQ), the Chinese mobile-service provider accused by short seller Carson Block of overstating revenue, jumped as much as 21 percent in U.S. trading after saying an ongoing investigation has found no evidence of fraud so far.
The stock surged 13 percent, the most in two weeks, to $12.60 in New York trading. The rally cuts into the 45 percent selloff since Block said in October that NQ Mobile was “a massive fraud,” allegations that the Beijing-based company denies.
West Texas Intermediate oil dropped to $99.75 a barrel in New York, the lowest settlement since April 2. The Energy Information Administration reported supplies gained 1.7 million barrels to 399.4 million in the week ended April 25.
Gold futures dropped 0.5 percent to $1,289.86 an ounce in New York. The metal had risen 7.8 percent this year through yesterday. Copper dropped 1.5 percent to settle at $3.0275 a pound for a second day of losses