U.S. stocks rose, sending the Standard & Poor’s 500 Index (CME:SPZ13) above its record close, as investors weighed the timing of any cuts to Federal Reserve monetary support amid budget negotiations in Washington.
Sysco Corp. jumped 8.7% after the food distributor agreed to buy closely held US Foods in a deal valued at about $3.5 billion. Gilead Sciences Inc. advanced 1.4% after getting approval for a hepatitis C pill that may generate more than $6 billion in annual sales. McDonald’s Corp. dropped 1.1% after November sales missed analysts’ estimates.
The S&P 500 rose 0.3% to 1,810.76 at 1:30 p.m. in New York. The Dow Jones Industrial Average added 30.89 points, or 0.2%, to 16,051.09. Trading in S&P 500 stocks was 6% below the 30-day average at this time of day.
“People are getting more comfortable with the idea of tapering and the concept that the reason for the taper is that the economy is getting stronger,” Walter Todd, who oversees about $950 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said by phone. “At the end of the day that’s a good thing not a bad thing. For the next week it’s just going to be speculation around the timing.”
The S&P 500 gained 1.1% on Dec. 6, halting a five- day slump that erased 1.2% from the gauge, as jobs growth in November beat estimates and the unemployment rate fell to a five-year low.
The index fell less than 0.1% last week, snapping an eight-week rally that was the longest in almost a decade, as improving economic data spurred concern that the Fed will reduce its stimulus sooner than expected.
Fed policy makers will probably begin reducing $85 billion in monthly bond buying at a Dec. 17-18 meeting, according to 34% of economists surveyed on Dec. 6 by Bloomberg, an increase from 17% in a November survey. In November, 53% predicted a tapering in March, compared with 40% in the poll of 35 economists.
Fed Bank of St. Louis President James Bullard, who votes on policy this year, said in a speech today the odds of tapering bond purchases have risen along with gains in the labor market, and any reduction should be modest to account for low inflation.
“A small taper might recognize labor-market improvement while still providing the committee the opportunity to carefully monitor inflation during the first half of 2014,” Bullard, a supporter of record stimulus, said in St. Louis.