The Standard & Poor’s 500 Index extended its best monthly rally since 2011 while Treasuries reversed losses and the dollar erased gains as the Federal Reserve refrained from indicating when it will reduce the pace of stimulus.
The S&P 500 increased 0.6% to 1,696.3 at 2:41 p.m. in New York to extend its July rally to 5.6% and reclaim a record high on a closing basis. Treasury 10-year note yields were little changed at 2.61% after earlier jumping as much as nine points. Gold futures slipped 0.2%, trimming the biggest monthly gain since January 2012, while oil rallied 2%. The MSCI Emerging Markets Index headed for the longest losing streak since April. The Bloomberg Dollar Index lost 0.2% after jumping as much as 0.5% in morning trading.
Fed Chairman Ben S. Bernanke and his colleagues are debating when employment gains will be sufficient to warrant tapering bond purchases that swelled the Fed’s balance sheet to a record $3.57 trillion. The Fed said that while economic growth should pick up from its recent pace, persistently low inflation could hamper the recovery. Government data today showed gross domestic product grew at a 1.7% annualized rate, more than the 1% advance predicted in a survey of economists. The European Central Bank and Bank of England meet tomorrow.
“The statement should come as no surprise, the Fed will remain largely data dependent as to asset purchases, while noting persistently low inflation may be a risk to the economy,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview. His firm oversees $290 billion. “The mention of low inflation being a risk may push out expectations for tapering, but by and large, this statement reads as expected.”
The Fed said its bond purchases will remain divided between $45 billion a month of Treasury securities and $40 billion a month of mortgage-backed securities. The Fed also will continue reinvesting securities as they mature.
“The committee recognizes that inflation persistently below its 2% objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington.
Consumer, financial and industrial companies helped lead gains among eight of the 10 main industry groups in the S&P 500. Comcast Corp. climbed 5.4% after posting earnings that topped analyst estimates. Facebook Inc. briefly rose above its $38 initial public offering price for the first time since its debut trading day, before retreating.
Some 33 companies in the S&P 500 are releasing quarterly results today. Of those that have reported so far this season, 73% have topped analysts’ profit projections and 56% beat sales estimates, according to data compiled by Bloomberg.
Payroll data, to be released Aug. 2, will show employers added 185,000 workers in July, after increasing 195,000 in June, a separate survey shows. The jobless rate probably fell to 7.5% from 7.6%, according to economists’ projections.
Trading volumes for S&P 500 companies were in-line with the 30-day average. The Stoxx Europe 600 Index advanced 5.1% in July, also the biggest rally since October 2011.
Anheuser-Busch InBev NV, the world’s biggest brewer, rose 6.9%, the most in more than three years, after second- quarter profit growth topped estimates as it improved sales in Brazil and sold higher-priced beers in the U.S. Eutelsat Communications SA slid 6.2% after agreeing to buy Satelites Mexicanos SA in a transaction valued at $1.14 billion including debt.
The MSCI Emerging Markets Index fell 0.6%, trimming this month’s advance to 0.9%. Benchmark gauges in Turkey, Malaysia and the Philippines slid more than 1.2%. The Shanghai Composite rose for a second day, gaining 0.2% after Chinese policy makers pledged to stabilize growth.
The S&P GSCI Index of 24 commodities rose 1%, reaching its highest level of the session after the Fed statement. Nickel, copper, lead and oil jumped at least 2% to lead gains. West Texas Intermediate crude oil is up 8.8% in July, headed for its biggest gain since August. Today’s rally followed data showing oil inventories at a major hub dropped to a 15-month low.
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 other major currencies, lost 0.2% after earlier climbing as much as 0.5%.