U.S. stocks were higher in afternoon trading today, after the Standard & Poor’s 500 Index came within three points of a record, as the Federal Reserve raised the possibility monetary stimulus might end sooner than anticipated while acknowledging slack in the labor market.
The S&P 500 added 0.16 percent to 1,984.69 at 2:42 p.m. in New York, after gaining as much as 0.2 percent to approach its closing high of 1,987.98. The Dow Jones industrial average rose 42.68 points, or 0.25 percent, to 16,962.27. Trading in S&P 500 companies was 23 percent below the 30-day average for this time of the day.
“Any notion that the Fed is going to raise interest rates sooner than expected is going to cause some kind of response,” Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., which oversees $110 billion, said in a phone interview. “The market rallied a bit this morning based on the fact that they thought the Fed was going to be a bit more dovish, and maybe there was a little bit less than that right now.”
Fed officials came closer to agreement on an exit strategy from aggressive stimulus, while raising the possibility that it might occur sooner than anticipated, according to minutes of their July meeting.
“Many participants noted that if convergence toward the committee’s objectives occurred more quickly than expected, it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipated,” the minutes said.
Fed Chair Janet Yellen has committed monetary policy to stronger labor markets, which she measures with an array of indicators, so long as inflation remains in check. The minutes said “many participants” still see “a larger gap between current labor market conditions and those consistent with their assessments of normal levels of labor utilization.”
The S&P 500 rose to within about 0.1 percent of an all-time high reached July 24 amid bets that the Fed will leave interest rates near zero for longer even as economic growth shows signs of accelerating.
Yellen will speak on labor markets on Friday at the annual Fed Bank of Kansas City’s economic symposium that begins Thursday in Jackson Hole, Wyoming. Policy makers including European Central Bank President Mario Draghi will also speak.
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