Stocks re­treat from their record highs

The News Herald (Willoughby, OH) - - Front Page - By Stan Choe The As­so­ci­ated Press

Stocks re­treated from their record highs on Mon­day, ahead of a fre­netic week for mar­kets.

NEW YORK » Stocks re­treated from their record highs on Mon­day, ahead of a fre­netic week for mar­kets.

In­vestors are wait­ing to learn who the next head of the Fed­eral Re­serve will be, what sev­eral of the world’s big­gest cen­tral banks will de­cide on in­ter­est rates, and whether Ap­ple and other big U.S. com­pa­nies can keep pil­ing their prof­its higher. In the mean­time, re­ports con­tin­ued to show that the econ­omy is strength­en­ing and ne­go­ti­a­tions con­tin­ued in Wash­ing­ton to cut in­come-tax rates.

Amid the many cross cur­rents, the Stan­dard & Poor’s 500 in­dex fell 8.24 points, or 0.3 per­cent, to 2,572.83 from its record set on Fri­day. Losses for health care stocks, tele­coms and other ar­eas of the mar­ket over­shad­owed gains for tech­nol­ogy com­pa­nies and en­ergy pro­duc­ers.

The Dow Jones in­dus­trial aver­age fell 85.45, or 0.4 per­cent, to 23,348.74, and the Nas­daq com­pos­ite dropped 2.30, or less than 0.1 per­cent, to 6,698.96. Smaller stocks fell more than the rest of the mar­ket, and the small-cap Rus­sell 2000 in­dex lost 17.42, or 1.2 per­cent, to 1,490.90.

In­vestors ex­pect Pres­i­dent Don­ald Trump to an­nounce his choice for the next chair of the Fed­eral Re­serve by the end of the week. The cen­tral bank has played a piv­otal role in the econ­omy’s re­cov­ery from the Great Re­ces­sion and the stock mar­ket’s leap to record af­ter record. Jerome “Jay” Pow­ell, a mem­ber of the Fed­eral Re­serve’s board, is Trump’s lead­ing can­di­date to re­place Janet Yellen as the head of the na­tion’s cen­tral bank, with an an­nounce­ment planned for Thurs­day, ac­cord­ing to se­nior ad­min­is­tra­tion of­fi­cials.

The choice could have far-rang­ing ef­fects on the mar­kets, par­tic­u­larly if the new chair ad­vo­cates a more ag­gres­sive pol­icy in rais­ing in­ter­est rates than Yellen has. Low in­ter­est rates have helped to push re­turns higher for bond funds, stocks and all kinds of other in­vest­ments around the world. But pres­sure may be ris­ing for the Fed to in­crease rates more quickly.

A re­port on Mon­day showed that U.S. con­sumer-spend­ing growth ac­cel­er­ated last month, led by a pickup in auto sales. It’s the lat­est piece of ev­i­dence that the econ­omy is pick­ing up mo­men­tum.

On Fri­day, the week’s head­line eco­nomic re­port is ex­pected to show that job growth con­tin­ues to be strong and that the un­em­ploy­ment rate re­mained at a 16year low.

Against the back­drop of an econ­omy that’s grow­ing at a 3 per­cent an­nual rate, all those in­gre­di­ents could lead to higher in­fla­tion, some­thing that’s been scarce in the global econ­omy for years, said Jim Paulsen, chief in­vest­ment strate­gist of the Leuthold Group. That could force the Fed to push rates higher more quickly.

“We’ve rarely had 3 per­cent backto-back quar­ters of growth in this re­cov­ery, and we have never had that when we’ve been at 4 per­cent un­em­ploy­ment,” he said.

The Fed­eral Re­serve is sched­uled to start a two-day meet­ing on Tues­day. Most in­vestors ex­pect the Fed to raise rates at its next meet­ing in De­cem­ber, which would be the third in­crease of the year.


Peo­ple look at an elec­tronic stock board of a se­cu­ri­ties firm in Tokyo, Mon­day.

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