S&P Ends Up 8.3% For the Month
New York — U.S. stocks faded late in October’s final session, paring the strongest monthly gain since 2011 as financial and consumer staples shares retreated.
The S&P 500 declined 0.5 percent to 2079.36, with the gauge up 8.3 percent for the month. Stocks are also extended to five their longest streak of weekly advances this year. The Dow Jones industrial average closed at 17,663.54, up 16.84 for the week.
“Recent Fed comments have been a little more hawkish, and we didn’t get further easing from the Bank of Japan,” said Matt Maley, an equity strategist at Miller Tabak & Co LLC in New York. “It’s not like the market is falling out of bed, but when you combine that with how much we’ve been up lately, it gives us an excuse to pull back. We just had this huge rally — pulling back is normal and healthy.”
Analysts project profits for S&P 500 members dropped 3.9 percent in the third quarter, improving from an estimated 6.1 percent decline a week ago, following better-than-forecast results from Chevron and Exxon Mobil. With about two-thirds of companies in the index finished with reporting this season, 75 percent have beaten profit projections, while only 44 percent have exceeded sales estimates.
The S&P 500 had rebounded nearly 12 percent from its August low, spurred by gains in energy and technology shares — the same groups that helped drag the index to its worst quarter since 2011. Both are now headed for their strongest monthly increase in four years amid easing concern that weakness in China will spread.
Central banks have dominated markets this month, with a weak U.S. jobs report jolting equities out of a summer swoon and sinking the dollar on speculation the Federal Reserve would keep interest rates pinned near zero into 2016. Persistent signs of weak global growth prompted the European Central Bank to hint at potential extra stimulus, while China unexpectedly cut its lending rate.
Fed officials said last week that U.S. growth was moderate, and they will evaluate progress in the labor market and inflation readings when considering whether to raise rates at their next meeting in December.
Traders have now shifted their bets on the likelihood of a December increase — pricing in a 50 percent chance of liftoff by year end, compared with as low as 30 percent last week.
An earlier report Friday showed household spending rose less than forecast in September, with the smallest gain since January. Separate data showed wages and salaries rose in the third quarter at a faster pace, while another report showed consumer sentiment increased less than forecast in October as Americans viewed buying conditions as less favorable than they did earlier in the month.
Global stock markets were muted Friday on renewed expectations for a Fed rate hike this year but are ending October with strong gains after snapping back from a volatile third quarter.
France’s CAC 40 fell 0.3 percent to 4,873.33 while Germany’s DAX shed 0.4 percent to 10,757.02 after official figures showed the eurozone’s inflation rate was a muted 0 percent in October. Britain’s FTSE 100 fell 0.4 percent to 6,371.07. The DAX is the best performing major European stock index in October, with a gain of almost 12 percent.
Investors increasingly believe the U.S. Federal Reserve will raise its benchmark interest rate from a record low in December. Data on Thursday showed the U.S. economy cooled during the third quarter but that was largely due to transitory changes in inventory levels and the underlying picture is in line with the Fed’s view of a moderately strong economy. Super low interest rates have been a boon for stock markets for several years.
The soft third quarter American growth “is unlikely to be an excuse for the Fed to hold off a rate hike,” said Bernard Aw, market strategist at IG in Singapore. “As long as the jobs data resumes a strong upward trajectory, shrugging off the soft patch in August and September, alongside improvement in the inflation numbers, the case for a December liftoff remains alive,” he said in a market commentary.
The New Zealand dollar surged in the wake of China’s announcement it would allow all couples to have two children, abolishing its unpopular one-child policy.
New Zealand is a major dairy exporter and its milk powder and formula industry is likely to benefit from a baby boomlet in China. The kiwi dollar jumped to $0.6751 from $0.6699 the day before. Shares of baby-related stocks also posted big gains.
Stroller maker Goodbaby International was up 2.3 percent in Hong Kong and Beingmate Baby & Child Food vaulted 10 percent in Shenzhen.
Japan’s Nikkei 225 rose 0.8 percent to 19,083.10 after the Bank of Japan left its super-easy monetary policy unchanged but kept the door open to extra stimulus if risks to growth increase. The index rose 12.7 percent for the month. Hong Kong’s Hang Seng fell 0.8 percent to 22,640.04 and South Korea’s Kospi shed 0.2 percent to 2,029.47. China’s Shanghai Composite was little changed at 3,382.56 but rose 11.3 percent for the month. Australia’s S&P/ASX 200 slipped 0.5 percent to 5,239.40. Stock benchmarks fell in Taiwan, Singapore the Philippines and Indonesia, but rose in Thailand.
Benchmark U.S. crude was up 17 cents to $46.23 a barrel in electronic trading on the New York Mercantile Exchange. The contract added 12 cents to $46.06 a barrel in New York on Thursday.
Material from Bloomberg News and The Associated Press was used in this report.