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Policy: Economy

S&P 500 reaches record; Treasurys gain, emerging markets slump

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Finance and Banking,Economy,Federal Reserve,Janet Yellen,Bloomberg News,Financial Markets

U.S. stocks rose, with the Standard & Poor’s 500 Index climbing to a record, as retailers led gains amid optimism about the holiday shopping season. Emerging market stocks extended the longest slump in seven years while Treasuries advanced and oil rebounded from a five-month low.

The S&P 500 increased 0.5 percent to 1,777.25 at 3:35 p.m. in New York, reclaiming its record on a closing basis for the first time since Oct. 29. The MSCI Emerging Markets Index retreated 1.2 percent as OAO Mechel, Russia’s biggest producer of coal for steelmakers, plunged 41 percent. Gasoline, cocoa and oil jumped more than 1 percent to lead gains in commodities. Ten-year Treasury yields fell five basis points to 2.73 percent. The British pound rallied against all major peers.

Macy’s Inc. jumped more than 9 percent for the top gain in the S&P 500 after reporting better-than-forecast earnings and signaling stronger demand heading into the holidays. Janet Yellen will testify before the Senate Banking Committee on Thursday to discuss her nomination as Federal Reserve chairman and record stimulus she’s supported.

“People are starting to think about the implications of a positive holiday season,” Walter Todd, chief investment officer at Greenwood Capital Associates LLC, said in phone interview. “Retail for a while had been underperforming going back to the summer, but just the past couple weeks we’ve gotten some positive data points from Gap, Limited Brands and now Macy’s.”

Yellen testimony

Testifying to the Senate Banking Committee, Yellen will try to defend a policy that’s swelled the Fed’s balance sheet to almost $4 trillion while facing four Republicans who voted no on her 2010 bid to be vice chairman. Scrutiny of the Fed’s quantitative easing program increased after reports last week showed U.S. payrolls and gross domestic product increased more than economists forecast.

The S&P 500 recovered from yesterday’s 0.2-percent drop as consumer-discretionary, technology and consumer-staples shares led gains in eight of the 10 main industry groups. U.S. Steel Corp. rose 1.6 percent as Morgan Stanley upgraded its recommendation on the shares. Tesla Motors Inc. rose 1.1 percent as co-founder Elon Musk said the company won’t recall its Model S after fires involving the electric sedan.

The MSCI Emerging Markets Index dropped to a two-month low. The Shanghai Composite Index slid 1.8 percent, the most in almost seven weeks. The Jakarta Composite Index fell 1.8 percent before the government reported the current-account deficit narrowed in the third quarter. Benchmark gauges in Russia, Poland, Egypt, South Africa, South Korea, Taiwan and the Czech Republic slid more than 1 percent.

European markets

The Stoxx Europe 600 Index lost 0.6 percent as about four shares fell for every one that gained. ProSiebenSat.1 Media AG tumbled 4 percent as KKR & Co. and Permira Advisers LLP sold 35 million shares for about $1.48 billion. Stada Arzneimittel AG, Germany’s biggest publicly traded generic-drug maker, retreated 5.5 percent as earnings missed estimates. Intesa Sanpaolo SpA, Italy’s second-largest bank, slid 2.3 percent after profit fell as non-performing loans rose.

Today’s advance in Treasuries left the 10-year securities little changed from the end of last week. Yields fell for the first time in three days as the Treasury’s auction of $24 billion of the securities attracted the higher demand since September.

The difference in yield between longer-maturity bonds and shorter-term debt is increasing as central banks pledge to keep down interest rates for a sustained period of time. The extra yield to maturity investors get for holding bonds maturing in 10 years or more, compared with those due in three-to-five years, increased to 1.78 percentage points yesterday, the widest spread since May 2010, according to Bank of America Merrill Lynch Global Broad Market Plus Indexes.

Pound gains

The pound gained versus all 16 major counterparts, advancing 0.6 percent against the euro. The U.K. jobless rate, which fell to 7.6 percent in the third quarter according to data released today, is more likely than not to reach 7 percent in the third quarter of 2015, based on the path of interest rates projected by investors, according to the BOE.

The yen strengthened 0.3 percent to 99.36 per dollar and advanced 0.1 percent per euro. The 17-nation shared currency added 0.2 percent to $1.3463. Sweden’s krona weakened against 12 of 16 major peers after Finance Minister Anders Borg said policy makers need to monitor a drop in consumer prices brought on by a strong currency that he says is a “risk” to the economy.

China copper

Copper retreated 2 percent to $6,980 a metric ton on the London Metal Exchange, reaching the lowest price in more than three months, following record output in China while oil rebounded from the lowest price since May. Refined-copper production in October in China rose 23 percent to 637,000 tons from a year earlier, according to data from the statistics bureau. That was 2.6 percent higher than the previous record in September.

Gold futures capped the longest slump in three months in New York as global equities rebounded, reducing demand for the metal as an alternative asset. Gold for December delivery lost 0.2 percent to settle at $1,268.40 an ounce.

Natural gas settled little changed after rallying for six straight days on forecasts for colder-than-normal weather in the U.S. that may boost demand for the heating fuel. Crude oil gained 1.3 percent in New York to $94.27 a barrel on speculation that increasing refinery profits from making gasoline and heating oil will bolster use of the raw material.

Futures advanced as much as 1.6 percent as the margin to turn crude into fuel, expressed by the so-called crack spread, climbed to the highest level since August. Gasoline jumped on forecasts that a government report tomorrow will show supplies fell for a fifth week. WTI’s discount to Brent oil widened to the most in seven months as unrest in Libya disrupted exports.

Houston-based Schlumberger Ltd., the world’s largest oilfield-services provider, is selling bonds in euros as the cost of borrowing in the currency relative to U.S. dollars approaches the cheapest in almost five years.

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