U.S. stocks rise on stimulus speculation as factory output falls

U.S. stocks rose, pushing benchmark indexes to fresh records, as data showing weakness in manufacturing fueled bets the Federal Reserve will be in no hurry to scale back stimulus.

The Standard & Poor’s 500 Index rose 0.5% to 1,658.70 at 4 p.m. in New York. The benchmark equity gauge has set a record in nine of the past 10 sessions. The Dow Jones Industrial Average added 59.36 points, or 0.4%, to a record 15,274.61 today.

“The global economic outlook gives some support to the idea that more easing is on its way, especially with soft inflation,” Oliver Pursche, co-manager of the GMG Defensive Beta Fund and president of Suffern, New York-based Gary Goldberg Financial Services, said via phone. The firm manages about $650 million. “It would be surprising if there was a meaningful and prolonged pullback at this point.”

The U.S. bull market has entered its fifth year. The S&P 500 has surged 145% from a 12-year low in 2009, driven by better-than-estimated corporate earnings and three rounds of bond purchases from the Federal Reserve.

The central bank’s policy makers debated at their April 30- May 1 meeting whether to expand or curb the pace of stimulus. They said they’re prepared to increase the $85 billion monthly rate of bond buying in response to changes in the labor market or inflation. Fed Chairman Ben Bernanke has said he would continue unprecedented stimulus until the jobless rate falls to 6.5% or inflation rises above 2.5%.

Data from the Labor Department showed wholesale prices dropped in April by the most in three years, reflecting a decrease in fuel costs that is helping underpin profits.

Factory Output

U.S. industrial production declined in April by the most in eight months, reflecting broad-based cutbacks in factory output and indicating American manufacturers will provide little support for an economy beset by weaker global markets and federal budget cuts. Manufacturing in the New York region unexpectedly shrank in May as factories received fewer orders and sales stagnated, a separate report showed.

The euro-area economy shrank 0.2% in the first quarter after a 0.6% decline in the previous three months, the European Union’s statistics office in Luxembourg said today. Bank of England Governor Mervyn King declared that a U.K. recovery is “in sight.”

Bloomberg News

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