The Standard & Poor’s 500 Index fell after reaching an all-time high as investors weighed comments from central bank leaders for clues to monetary policy amid rising geopolitical tension.
The S&P 500 fell 0.2 percent to 1,988.40 at 4 p.m. in New York. The benchmark gauge ended the week with a 1.7 percent gain, its biggest advance since April.
The Dow Jones Industrial Average lost 38.34 points, or 0.2 percent, to 17,001.15 on Friday. The Nasdaq Composite Index added 0.1 percent to the highest level since 2000. Trading in S&P 500 companies was 22 percent below the 30-day average for this time of the day.
“Janet Yellen does not appear to have broken any new ground,” Jim McDonald, chief investment strategist at Chicago-based Northern Trust Corp., said. His firm manages about $924 billion of assets. “The advance to the record has been supported by good U.S. economic data of late. The Fed is also doing a good job at preparing the market for the eventual increase in interest rates. As long as the economy continues to perform well, the market is in good shape.”
Equities fluctuated after Federal Reserve Chair Yellen said in a speech at the Kansas City Federal Reserve’s annual economics conference in Jackson Hole, Wyoming, that slack remains in the labor market even after gains made during the five years of economic recovery. European Central Bank President Mario Draghi called for governments to do more to help the euro- area economy.
The S&P 500 climbed to an all-time closing high of 1,992.37 Thursday as data from housing to manufacturing indicated that the world’s largest economy continues to strengthen. Minutes from the Fed’s July meeting released earlier this week reinforced the central bank’s commitment to supporting the recovery even as some policy makers indicated a willingness to raise rates sooner than anticipated.
Fed Bank of St. Louis President James Bullard said in an interview the U.S. central bank may begin tightening monetary policy earlier than officials previously expected, while Atlanta Fed President Dennis Lockhart urged more patience.
“The evidence is leading toward an earlier increase than would have been in the works earlier this year,” Bullard said. “Labor markets have improved quite a bit relative to what the committee was thinking.”
Atlanta’s Lockhart on Thursday warned of the risk of “moving prematurely and snuffing out some progress.”
Draghi’s call for politicians to play their part in safeguarding the euro-area recovery comes as pressure mounts on the ECB for radical measures such as quantitative easing. One year after the end of the currency bloc’s longest-ever recession, the economy has stalled, unemployment remains near a record high and inflation is the weakest in almost five years.
“Draghi has been very good at letting the market know that the ECB is ready to act, but the market will ultimately call his bluff if he doesn’t deliver,” Todd Lowenstein, who helps manage $16 billion at Highmark Capital Management in Los Angeles, said. “There’s a sense of impatience going on with the deterioration in the Eurozone, and there’s a growing desire to see an action plan.”
In June, the ECB introduced targeted long-term refinancing operations to improve bank lending in the non-financial private sector.
Three rounds of Fed stimulus and better-than-projected corporate earnings have helped the S&P 500 almost triple since its low in March 2009. The S&P 500 has not had a decline of 10 percent in almost three years. It trades at 17.8 times the reported earnings of its companies, near the highest level since 2010.
The S&P 500 has rebounded 4.1 percent from a two-month low on Aug. 7, bolstered by easing tensions in Ukraine and speculation that central banks will keep interest rates low.
Stocks dropped early in the day after NATO said it has seen large transfers of advanced weapons and sees an “alarming build-up” of Russian forces near Ukraine. Trucks carrying what Russia says is humanitarian aid crossed the border into Ukraine, whose government said the move amounted to an invasion because the convoy moved without its consent.
Russia is invading under the cover of the aid trucks, Valentyn Nalyvaychenko, the head of Ukraine’s security council, said on TV5.
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