The U.S. stock market rose in early trading Monday, driven not by any new economic data but by investors counting on the Federal Reserve to extend programs meant to boost the economy. | AP file photo
Updated: June 17, 2013 3:17PM
NEW YORK — Stocks are closing higher as traders hope that the Federal Reserve will decide to continue its economic stimulus program when it meets this week.
The Standard & Poor’s 500 index climbed 12 points, or 0.8 percent, to close at 1,639 Monday. Energy and technology stocks rose the most.
The Dow Jones industrial average rose 109 points, or 0.7 percent, to 15,179.
The Nasdaq composite rose 28 points, or 0.8 percent, to 3,452.
Traders think Fed officials will determine that the economy isn’t recovering fast enough. That could influence the Fed to keep interest rates low to encourage borrowing and spending.
Two stocks rose for every one that fell on the New York Stock Exchange. Volume was lighter than average at 3.1 billion shares.
With few big company announcements or economic reports, investors spent the day in a holding pattern. They’ll have to keep guessing about the Fed’s future actions until Wednesday, when Chairman Ben Bernanke holds a news conference at the end of a two-day policy meeting.
Stocks were up Monday because investors think Fed leaders will determine that the economy isn’t recovering fast enough. That might not sound like good news, but it would influence the Fed to continue the programs it has implemented to stimulate the economy: keeping interest rates low to encourage borrowing and buying bonds to push investors into stocks.
Doug Lockwood, branch president of Hefty Wealth Partners in Auburn, Ind., said it’s not rational for the stock market to regard bad news as good, and to be yanked back and forth more by the actions of a central bank than the underlying fundamentals of the economy.
“I think the market’s a little hooked on a drug here,” said “You take drugs, you feel better, but it’s short lived. Printing of money should never be considered a great thing for the economy.”
Bernanke said May 22 that the Fed would consider pulling back on its bond-buying program if measures of the economy, especially hiring, improve. That sent the market into flux: In the 16 trading days since then, the Dow has swung by triple digits 10 times. Overall, the Dow is down about 1 percent since before Bernanke’s testimony.
So what made investors think that Bernanke will regard the economy as weak enough to still need stimulus?
Analysts said there were two main points. Earlier this month, the government reported that the U.S. added 175,000 jobs in May — a solid addition, but not enough to cut into the unemployment rate. And on Friday, the government said that a key measure of inflation — the producer price index, which measures price changes before they reach the consumer — rose just 0.1 percent after stripping out the volatile costs of food and gas. That’s important because the Fed’s stimulus could stoke inflation. Friday’s report buys the bank time to keep pumping money into the economy.
Two points of economic data released Monday were positive, though both are considered less-important gauges of the U.S. economy. A measure of New York state factory activity showed a pickup, and a survey of U.S. homebuilders said they were more optimistic about home sales than they have been in seven years.
Fred Dickson, chief investment strategist at D.A. Davidson & Co. in Portland, Ore., described the economy as moving “grudgingly ahead.” But sustained growth can’t come, he said, until the government gives businesses a better idea of what to expect in the way of financial, health care, labor and energy rules.
“Businesses seem to be suffering from a severe case of what’s-next-itis paralysis,” Dickson said.
Japan, trying to spur its own economy with a central bank bond-buying program, saw its benchmark Nikkei 225 index jump nearly 3 percent, extending Friday’s gain of more than 2 percent. A drop in the value of the yen over the weekend helped, because it means that Japan’s exports will be cheaper and more competitive.
In other U.S. stock trading, the Standard & Poor’s 500 index was up 20 points, or 1.2 percent, to 1,646. The Nasdaq composite was up 45, or 1.3 percent, to 3,468.
The price of crude oil rose 32 cents to $98.17 a barrel in New York. Gold edged down $4 to $1,383 an ounce.