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London - US stocks fell, after the S&P 500 capped its longest stretch of monthly advances since 2014, amid evidence of sluggish global growth while investors awaited a report on manufacturing activity in the world’s biggest economy.
The S&P 500 lost 0.5% to 2 086.84 at 15:32, after closing little changed yesterday to complete its third straight monthly gain.
“Given where the market is, bumping up against the highs from April and November last year, people are looking for reasons to take profits and not try to play the market,” Chuck Self, chief investment officer of iSectors LLC, said by phone.
“If the May numbers are not that strong, it not only affects the Fed, but it also affects how people look at the second quarter.”
Readings on manufacturing in China and the euro area showed tepid expansion, reminding investors of the risk that overseas weakness could spread to the US economy.
Meanwhile, the Organisation for Economic Cooperation and Development cut its forecasts for growth this year in the US and Japan, while warning the global economy is slipping into a self-fulfilling “low-growth trap” where ultra-loose monetary policy risks doing more harm than good.
The S&P 500 climbed 1.5% in May as speculation grew the world’s biggest economy can withstand a Federal Reserve rate increase this summer, and as Apple lifted technology shares. The climb rejuvenated a rally that had lost momentum after surging 15% from a 22-month low in February. The index yesterday closed within 0.3% of a four-month high reached in April.
Investors are awaiting a release today forecast to show manufacturing expanded at a slower pace in May, while payrolls data are due on Friday. Fed chair Janet Yellen said last week an improving economy would probably warrant another rate increase in the coming months, while her colleagues have indicated willingness to act.
The bank also releases its Beige Book assessment of regional economic conditions at 17:00 today. Its next rate decision is set for June 15.
Traders have reined in expectations for higher borrowing costs so far this week. They now price in a 51% chance of a rate increase by July. The probability of a June boost is 18%, down from 34% a week ago.
