NEW YORK (Reuters) – The S&P 500 (.SPX) hit a four-month high on Monday, pushing through a key resistance level that drew more traders into the market even though the Federal Reserve is scheduled to meet on Tuesday. The S&P 500 has struggled to make a sustained move above 1,130 since June, most recently making an intraday break through it on Friday. Some traders expect a breakout if the index holds above the level on solid volume.
«Right now we’re seeing some short-covering and some people being somewhat dragged into the market as they have to keep up with a move like this,» said Bobby Harrington, head of UBS’s Boston securities division.
«There are still risks out there, but maybe there is a window here where there’s not a ton of news and the path of least resistance at the moment might be higher,» he said.
The next short term resistance for the S&P 500 stands at 1,140, the 61.8 Fibonacci retracement of its 2010 high-to-low slide.
Energy, financial and consumer discretionary shares led the market higher, with stocks such as American Express (AXP.N), Lennar Corp (LEN.N), and Anadarko Petroleum Corp (APC.N) posting strong gains.
The Dow Jones industrial average (.DJI) gained 93.28 points, or 0.88 percent, to 10,701.13. The Standard & Poor’s 500 (.SPX) rose 10.30 points, or 0.92 percent, to 1,135.89. The Nasdaq Composite (.IXIC) added 20.72 points, or 0.89 percent, to 2,336.33.
Volume at 3.66 billion shares after just around 3.5 hours of trading was in line with the weak to moderate volume of recent days. Traders will want to see a pick-up in trading by the close to confirm the market has made a convincing breakout.
«Right now the overall theme is that we’re not seeing volume come in,» Steve Goldman, market strategist at Weeden & Co. in Greenwich, Connecticut. «You tend to see volume occur with rallies. This one remains fragile.»
The Federal Reserve is expected to renew a promise to keep its portfolio from shrinking but not seen taking new steps to ease monetary policy.
Harrington said the most he was expecting is for rate setters to be a «little more dovish» in their policy statement.
Even so, gold hit record highs for a fourth day as speculation the Fed may announce further moves to stimulate the economy piqued interest in the precious metal.
The Arca Gold Bugs index (.HUI), which tracks the performance of 16 U.S.-traded gold producers, rose 1.9 percent, with Canada’s New Gold Inc (NGD.TO)(NGD.A) the biggest percentage gainer, up 5.9 percent to $6.27.
U.S. stocks held gains despite a survey that showed U.S. homebuilder sentiment held steady in September, pointing to a still-weak housing market.
The Dow Jones home construction index (.DJUSHB) gained 3.5 percent. Lennar, the No. 3 U.S. homebuilder, posted a stronger-than-expected third-quarter profit and a decline in orders that was less severe than Wall Street feared. Its shares rose 8.6 percent to $15.19.
On the downside, International Paper Co (IP.N) fell 7.5 percent to $21.71 after an influential trade magazine reported that it believed packaging producers have not been able to increase container board prices to customers.
American Express (AXP.N) rose 3.5 percent to $42.83 as financial stocks posted strong gains, with the KBW Bank index (.BKX) adding 1.2 percent.
Anardarko Petroleum Corp (APC.N) gained 2.6 percent to $55.57 and the S&P energy index (.GSPE) rose 1.5 percent as crude oil futures increased 1.8 percent.