NEW YORK - U.S. stocks rose, paring the Standard & Poor’s 500 Index’s first weekly decline in almost two months, as Federal Reserve Chairman Ben S. Bernanke said he saw “scope for further action,” increasing speculation the central bank will act to boost economic growth.
Nine out of 10 groups in the S&P 500 rose, as consumer discretionary, industrial and financial stocks erased earlier losses. Watson Pharmaceuticals Inc. climbed 5.7 percent for the biggest gain in the benchmark gauge for U.S. stocks after its generic painkiller Lidoderm got approval from the Food and Drug Administration. QEP Resources Inc. jumped 5 percent after agreeing to buy North Dakota oil assets.
The S&P 500 added 0.6 percent to 1,410.04 at 1 p.m. New York time. The Dow Jones Industrial Average rose 77.16 points, or 0.6 percent, to 13,134.62 today. Trading in S&P 500 companies was 18 percent below the 30-day average at this time of day.
“It was confirmation of Bernanke’s commitment to potentially do something more if the economy appears it needs it,” John Carey, who helps oversee about $220 billion at Pioneer Investments in Boston, said in a telephone interview. “That was reassuring to people who might have thought he was stepping back from that.” He said, “It’s summer trading and volume is light so it doesn’t take much to move the market. A little whiff of positive news was enough.”
The S&P 500 has advanced for the past six straight weeks, amid optimism that global central banks will take actions to stimulate growth. At the same time, trading volume and volatility have dropped this month as vacationing traders await policy clues from the Fed’s annual summit in Jackson Hole, Wyoming, and a European Central Bank meeting in September.
“There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery,” Bernanke said in an Aug. 22nd letter to California Republican Darrell Issa, the chairman of the House Oversight and Government Reform Committee.
Minutes from the Federal Open Market Committee’s July 31- Aug. 1 meeting showed many members judged that more stimulus “would likely be warranted fairly soon” unless the pace of the recovery picks up. Bernanke will have an opportunity to clarify his views in his Aug. 31 speech at Jackson Hole, where he signaled a second round of bond buying in 2010.
A report earlier today showed demand for U.S. capital goods such as machinery and communications gear dropped in July by the most in eight months, indicating companies are pulling back on investment. Bookings for non-military capital equipment excluding planes slumped 3.4 percent, the Commerce Department report showed.