U.S. stocks recovered from earlier losses amid speculation the Federal Reserve will be patient in deciding when to increase interest rates.
Merck & Co., Johnson & Johnson and Chevron Corp. paced losses in health-care and energy stocks that led the market lower earlier. CSX Corp. jumped almost 10 percent after the railroad operator spurned a merger proposal by Canadian Pacific Railway Ltd., according to people familiar with the matter. Norfolk Southern Corp. and Kansas City Southern climbed at least 2.4 percent.
The Standard & Poor’s 500 Index (CME:SPZ14) rose 0.2 percent to 1,909.64 as of 12:38 p.m. in New York, after earlier dipping below its average from the past 200 days for the first time in two years. The Dow Jones Industrial Average increased 34.78 points to 16,578.88, reversing an earlier drop of more than 80 points. The Nasdaq Composite Index added 0.4 percent, reversing a 1.3 percent morning slide, while the Russell 2000 Index of smaller companies increased 1.2 percent.
Trading of S&P 500 stocks was 39 percent higher than the 30-day average at this time of day.
A rout in global equities wiped $1.54 trillion from shares last week amid growing concern of an international economic slowdown. Equities recovered today as Chicago Fed President Charles Evans reiterated his concern that inflation may rise only slowly to the U.S. central bank’s 2 percent goal and said policy makers should be “exceptionally patient” in adjusting monetary policy.
Fed officials said over the weekend that the threat from overseas may lead to rate increases being delayed. The remarks highlighted mounting concern over the improving U.S. economy’s ability to withstand foreign weakness and a strengthening dollar.
The International Monetary Fund cut its forecast for global growth last week and said the euro area faces the risk of a recession. The IMF also said that the chances of equity losses in 2014 have risen and stock valuations may be “frothy.” Three months earlier, the Fed said prices were stretched for stocks in spheres such as social media and biotechnology.
European Central Bank President Mario Draghi said last week that there are signs the euro-area’s economic growth is slowing and policy makers must lift inflation from an “excessively low” level.
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