U.S. stocks rose, after equities posted the biggest weekly drop since August, as investors watched data to gauge the outlook for stimulus before a two-day Federal Reserve meeting that starts tomorrow.
The Standard & Poor’s 500 Index (CME:SPH14) advanced 0.6% to 1,786.55 at 4 p.m. in New York, halting a four-day streak of declines.
“The big issue this week is the Fed’s meeting and what, if anything, they’re set to do,” Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, which oversees $60 billion, said from Philadelphia.“ The market seems to be increasingly prepared for the prospects of it, and yet at the same time, has not bought into the notion that it’s likely to occur this week.”
The S&P 500 last week retreated 1.7%, the biggest decline since Aug. 30, amid concern that improving economic data will prompt the Fed to cut stimulus. Policy makers will probably start reducing their $85 billion of monthly bond purchases at the meeting that starts tomorrow, according to 34% of economists surveyed Dec. 6 by Bloomberg, up from 17% in a Nov. 8 poll.
The benchmark gauge has surged 25% this year, on course for the biggest annual gain since 2003, as the Fed maintained its stimulus and economic data exceeded expectations.
With 10 trading days left in 2013, the stock market enters a period where equities tend to outperform the rest of the year. The S&P 500 has gained 1.2% on average in the last 10 days of the calendar year, according to data since 1928 compiled by Bloomberg. That compares with a 0.3% return over any 10-day period.
Fed policy makers have scrutinized data and watched Washington’s budget negotiations to determine whether economic growth is robust enough to withstand the withdrawal of some monetary support. The House of Representatives last week passed a budget that limits automatic spending cuts and avoids another government shutdown. The Senate is expected to vote this week.
Data today showed the Federal Reserve Bank of New York’s general economic index rose less than forecast in December. A separate report indicated industrial production climbed in November by the most in a year, a sign manufacturing is bolstering the world’s biggest economy.
In Europe, manufacturing in the euro area reached a 31-month high in December, led by Germany, a survey from London- based Markit Economics showed.