US: Stocks fluctuate near 2016 high after erasing year's losses

[NEW YORK] US stocks fluctuated near the highest levels this year amid deal activity while investors assessed a rally that turned equities positive for the year.

Valspar Corp surged 25 per cent after Sherwin-Williams Co agreed to buy the company for about US$9.3 billion. Starwood Hotels & Resorts Worldwide Inc advanced 4 per cent after accepting an improved bid from Marriott International Inc valued at US$13.6 billion, topping an offer from a group of investors led by China's Anbang Insurance Group Co.

The Standard & Poor's 500 Index slipped 0.1 per cent to 2,048.06 at 9:33 am in New York, and up 0.4 per cent in 2016 after closing Friday at the highest since Dec 30.

"Markets have had a pretty tremendous month," said Michael James, managing director of equity trading at Wedbush Securities Inc in Los Angeles. "We need to see a little bit of consolidation. Even with all that heavy lifting we've had, all it's done is gotten to flat on the year. I would expect the market's going to take a breather and it should."

The S&P 500 has staged one of the biggest turnarounds in history, rebounding 12 per cent from a Feb 11 low amid rallying crude prices and optimism that monetary policy will continue to support global growth. Energy and raw-material producers have led recent gains, rising to three-month highs last week after the dollar tumbled. A slower pace of rate increases signaled by the Federal Reserve helped the benchmark climb for a fifth week, its longest winning streak since November.

The Chicago Board Options Exchange Volatility Index, a measure of market turbulence known as the VIX, fell 15 per cent last week to a seven-month low.

Equities are heading for the first monthly increase in four, after worries over China's slowdown and routs in oil and banks dragged them to their worst-ever start to a year. A third day of gains for the S&P 500 on Friday helped erased a 2016 loss of as much as 11 per cent. The Dow capped its sixth daily advance, the longest rally since October, and is up 1 per cent for the year.

Policy makers' tempered outlook for rate increases, due in part to slower global growth, has knocked downtraders' expectations as reflected in futures prices. Odds for a June boost are at 42 per cent, compared with about 54 per cent before last week's Fed statement. A report today on existing home sales, and releases later this week on jobless claims and durable-goods orders, may provide further indications about the health of the US economy.

Wagers on a June rate increase ticked higher after Fed Bank of San Francisco President John Williams said in an interview that April or June have the potential for a move, adding that the central bank would be raising borrowing costs sooner if it weren't for global factors. In a speech in Paris today, Richmond Fed President Jeffrey Lacker said inflation will rise back to the bank's 2 per cent target "over the medium term," once energy prices stabilize and the dollar stops advancing.

"Investors are catching their breath after such big gains,'' said Heinz-Gerd Sonnenschein, a strategist at Deutsche Postbank AG in Bonn, Germany. "Stocks will probably move sideways in the next few days as the market gets more news from economic figures - from job markets, from companies - because the data we have been getting so far hasn't been that great.''

BLOOMBERG