The Standard & Poor’s 500 Index retreated from a record, set after the Federal Reserve cut stimulus yesterday, as investors weighed economic data that included jobless claims and home sales.
The S&P 500 (CME:SPH14) lost 0.1% to 1,809.52 at 4 p.m. in New York, trimming an earlier drop of 0.5%. The Dow Jones Industrial Average added 9.57 points, or 0.1%, to a 16,177.54, extending a record.
“You had such a sky-rocket yesterday in equities after the Fed announcement and really nothing has changed,” Timothy Ghriskey, who oversees $1.5 billion as the chief investment officer at Solaris Group LLC, said by phone from Bedford Hills, New York. “There’s a little bit of profit-taking off of that emotional spike.”
The S&P 500 rose to 1,810.65 yesterday and the Dow reached a record 16,167.97 after the Fed said it will cut its monthly bond purchases to $75 billion from $85 billion starting in January as the labor market improves. The central bank also said it will likely keep its benchmark interest rates low “well past the time” that the jobless rate falls below its target of 6.5%.
Three rounds of monetary stimulus have sent the S&P 500 up 167% from a 12-year low in 2009. The equities benchmark has surged 27% this year, on course for the biggest annual gain since 1997.
The S&P 500 has gained 0.1% this month, erasing an earlier decline of as much as 1.7%. December has been the second-best month for U.S. equity returns, according to data compiled by Bloomberg that starts in 1928. The average gain for the month is 1.5%, more than twice the overall monthly mean of 0.6%. The last December retreat for the S&P 500 was in 2007.
‘Back to Work’
“The market is going higher and everybody knows it’s going higher, so when you have any kind of selloff, you put any excess cash you have back to work,” Tom Wirth, a senior investment officer for Chemung Canal Trust Co., in Elmira, New York, said in a telephone interview. His firm manages $1.7 billion. “I don’t think that pattern is going to change any time in the near term.”
Data from the Labor Department today showed applications for unemployment benefits unexpectedly rose last week to an almost nine-month high of 379,000. The median forecast of 48 economists surveyed by Bloomberg called for a drop to 336,000.
A separate report showed previously owned home sales declined for the third consecutive month in November to the lowest level of the year as rising mortgage rates and a limited supply of properties discouraged buyers.
The Conference Board’s index of U.S. leading economic indicators, a gauge of the outlook for the next three to six months, increased 0.8% in November, the New York-based group said. The median forecast of economists surveyed by Bloomberg called for an advance of 0.7%.
“It’s clear that the economy is doing a little bit better and at the same time inflation is still low,” Michael Strauss, chief investment strategist and chief economist at Commonfund Group in Wilton, Connecticut, said by phone. His firm oversees about $25 billion of assets. “That’s sort of like the best of the world to the Fed to begin the tapering process and they did. The market is surprised and miffed by the initial claims data, but the reality is the data is probably not an accurate reflection” because of seasonal effects, he said.