NEW YORK: U.S. stocks advanced Monday, driving the S&P 500 to a fresh high for the year.
Major indexes have rallied since May 19, which marked a recent low, with the S&P 500 gaining 3.4% in that period. With the advance, the broad-market index is 1% below its all-time closing high from May 2015.
Comments from Federal Reserve Chairwoman Janet Yellen on Monday and the surprisingly weak jobs report on Friday reaffirmed the view that U.S. interest rates will rise gradually. Many investors say there are few attractive alternatives to stocks in a low-rate world, even though the stock market is no longer cheap after years of gains.
Federal Reserve Chairwoman Janet Yellen said the latest jobs report had raised significant questions about U.S. economic outlook, and that a decision on when to raise rates will depend on how these uncertainties evolve. Photo: AP.
“Why not stocks?” said Ben Pace, chief investment officer at HPM Partners, which manages $6 billion, comparing stock-market returns with those on bonds or cash.
The S&P 500 recently had a trailing price-to-earnings ratio of 18.8, higher than its 10-year average of 15.8, according to FactSet.
A rise in oil prices ignited gains in energy shares Monday. The Dow Jones Industrial Average rose 113.27 points, or 0.6%, to 17920.33. The S&P 500 gained 0.5%, and the Nasdaq Composite advanced 0.5%.
Energy stocks led the S&P 500, rising 2%. Shares of Transocean rose 15%, and Marathon Oil shares gained 4.8%. U.S. crude oil advanced 2.2% to $49.69 a barrel, the highest settlement since July 2015.
Some analysts say a push to all-time highs driven by some of the riskier sectors in the stock market, such as technology or health care, would be an encouraging sign for sustained gains. So far this year, investors have flocked to sectors that pay out high dividends, like utilities.
“Dividends are important, and you don’t want to undermine the fact that in a balanced portfolio, you want to have them,” said Art Hogan, chief market strategist at Wunderlich Securities. “But when you have a defensive sector that gets expensive, that’s where you get concerned,” he added.
Shares of companies in the S&P 500’s materials sector, which includes gold miners, gained 0.9% Monday. Gold for June delivery rose 0.4% to $1,244.60 an ounce, after surging 2.5% on Friday.
Major indexes briefly pared gains during a speech by Federal Reserve Chairwoman Janet Yellen, in which she said that Friday’s jobs report was “disappointing” and “on balance, concerning,” but cautioned against placing too much significance on one economic report.
Still, Ms. Yellen’s speech suggested “the Fed’s intention to gradually raise interest rates remains on track,” said Alan Gayle, director of asset allocation at RidgeWorth Investments, which manages $37 billion. If the jobs report for June shows improvement and the U.K. votes to remain in the European Union, “July is very much on the table,” he added.
The yield on the 10-year Treasury note rose to 1.723% from 1.707% on Friday.
The dollar rose after falling Friday. The dollar gained 1% against the yen to ¥107.61. The British pound fell 0.4% against the dollar to $1.4456. Fresh polls showed heightened support for the U.K. to exit the European Union in a June 23 referendum.
“The closer we get to the vote, the more pronounced the swings [in sterling] will get,” said Kully Samra, U.K. managing director at Charles Schwab.
