US stocks advance as S&P 500 rises to record levels

US stocks gained, pushing the Standard & Poor’s 500 Index to a fresh record, as investors focus on whether Fed would cut its monetary support amid budget negotiations in Washington.

The S&P 500 climbed 0.2% to 1,808.37 at 4 p.m. in New York, surpassing its previous record of 1,807.23 set on November 27. The Dow Jones Industrial Average rose 5.33 points, or less than 0.1%, to 16,025.53. The Nasdaq Composite Index climbed six points, or 0.2%, to 4069, setting a 13-year high. About 5.6 billion shares changed hands on U.S. exchanges, 8.9% below the three-month average.

Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles, said he expects stocks to hold onto this years gains as long as the Fed is perceived to be managing the wind-down of its bond-buying program.

“If investors feel that the Fed is tapering due to economic strength, and that theyre in control and there wont be a surge in interest rates, then it will be supportive of equity prices,” said Mr. Flam, whose firm has about $7 billion under advisement. He and many other investors say they arent planning any big changes to their strategy for the remainder of the year, particularly given 2013s big gains.

Richard Fisher, Feds President of Dallas, said in a Chicago speech that the Fed needs to begin tapering “at the earliest opportunity,” as the current pace of stimulus “comes at a cost that far exceeds its purported benefits.”

The central bank will also be watching the outcome of U.S. budget talks. Fed officials cited the drag from fiscal policy in their October 30 statement and Jeffrey Lacker, president of the Richmond Fed, said in a speech today that U.S. budget uncertainty is also weighing on business hiring and investment decisions.

In corporate news, McDonald’s plunged 1.1% to $95.72 for the biggest drop in the Dow. The world’s largest restaurant chain said sales at stores open at least 13 months rose 0.5% last month, trailing analysts’ estimates. Analysts projected a 0.6% increase, the average of 14 estimates from Consensus Metrix.

Abercrombie & Fitch Co. lost 2.2% to $34.10, bringing its decline this year to 29 percent. Chief Executive Officer Mike Jeffries got a new contract with the teen-apparel retailer amid weakening earnings and a call by shareholder Engaged Capital LLC for him to be replaced.

Sysco added 9.7% to $37.62. The company will pay $3 billion in common stock and $500 million in cash. Sysco, which will also assume about $4.7 billion US Foods’ debt, said it has secured fully committed bridge financing for the transaction.

Given Imaging shares soared 27% after the company, which makes ingestible pills that take photos inside patients bodies, agreed to be acquired by Covidien COV +0.09% for $860 million. Covidien shares edged higher.

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