U.S. Stocks Erase Drop, Copper, Oil Rise; Treasuries Trim Gain
U.S. stocks rose, erasing an early slide, and Treasuries pared gains as higher oil and copper prices fueled a rally in commodity producers and banks climbed amid speculation the Federal Reserve will take steps to spur the economy. Apple Inc. rose 2.6 percent before reporting earnings.
The Standard & Poor’s 500 Index climbed 1.1 percent to 1,083.48 at the 4 p.m. close in New York after tumbling as much as 1.3 percent earlier. Goldman Sachs Group Inc. recovered from a 2.8 percent slump to gain 2.2 percent. The 10-year Treasury yield slipped to 2.95 percent after falling to 2.89 percent earlier, while the two-year yield was little changed at 0.58 percent after setting a record low in the morning. Copper jumped the most in three weeks and oil topped $77 a barrel.
Nine of 10 industries in the S&P 500 advanced as traders speculated Federal Reserve Chairman Ben S. Bernanke may tomorrow announce plans to stimulate the economy. Commodity producers and homebuilders, which defied the earlier slump, led gains in stocks after better-than-estimated 2.1 percent growth in building permits spurred optimism in the outlook for demand.
“The market is getting a boost here on a story from somewhere that the Fed is going to announce that they will stop paying interest on reserves where they are currently paying 0.25 percent,” said Peter Boockvar, equity strategist at Miller Tabak & Co. in New York. “This would be the Fed’s attempt to force banks to lend money instead of parking it at the Fed. In my opinion, this is the last bullet in the gun of the Fed and therefore is not going to be used so soon.”
Financial companies in the S&P 500 erased a 1.8 percent tumble to gain 1.2 percent. Bernanke will give his semiannual report on monetary policy to the Senate Banking Committee tomorrow.
“We don’t comment on rumors,” said Michelle Smith, a spokeswoman for the Fed.
Equities slid earlier after International Business Machines Corp. and Texas Instruments Inc. joined Bank of America Corp. and General Electric Co. in posting revenue that missed analysts’ estimates as the slowing economic rebound makes it difficult to stimulate demand.
While second-quarter net income at S&P 500 companies has topped estimates by 11 percent, revenue has been just 3.3 percent more than forecast, according to data compiled by Bloomberg. Of the 42 companies in the S&P 500 that reported since July 12, all but nine topped earnings forecasts, based on data compiled by Bloomberg. Twenty-seven have beaten revenue estimates.
Goldman Sachs Earnings
Goldman Sachs, the most-profitable firm in Wall Street history, reported second-quarter income dropped 82 percent, missing analysts’ estimates on a slide in trading revenue. Net revenue of $8.84 billion compared with the average estimate of $8.94 billion from analysts surveyed by Bloomberg.
Chief Financial Officer David Viniar said on a conference call “we’re not aware of any criminal investigation” of the company following its settlement with regulators over fraud allegations in dealings with mortgage securities. He said in an interview with Bloomberg News that he’s “not aware of any discussions” about changing the chief executive officer or chief operating officer.
Crude oil for August delivery erased earlier losses, rising 1.2 percent to $77.44 a barrel after a tropical wave formed in the Caribbean and as volume diminished on the last day of trading August futures.
Copper prices jumped the most in three weeks, rising 2.2 percent to $3.0015 a pound in New York as U.S. building permits boosted the demand outlook for the metal used in electrical wiring and plumbing. A gauge of 12 homebuilders in S&P indexes rallied 4.2 percent, the most since June 10, as Meritage Homes Corp. surged 7 percent and Pulte Group Inc. climbed 4.7 percent.
Permits, a gauge of future construction, rose 2.1 percent last month to a 586,000 annual pace, the Commerce Department said. The gain was the first since March and was more than economists expected. Housing starts fell 5 percent in June from the prior month. Builders are the biggest users of copper and use about 400 pounds (181 kilograms) in the average home.
About two stocks fell in the Stoxx Europe 600 for each that rose. Cable & Wireless Worldwide Plc slumped 17 percent after saying profit will be at the lower end of estimates following U.K. government spending cuts. Nokia Oyj jumped 2.2 percent after the Wall Street Journal reported the company is looking to replace Chief Executive Officer Olli-Pekka Kallasvuo.
The Shanghai Composite Index posted its biggest two-day advance since May, up 4.3 percent so far this week. International Strategy & Investment Group said China will ease policies aimed at curbing real-estate speculation and Morgan Stanley predicted the government may raise its loan targets.
The MSCI Asia Pacific Index rose less than 0.1 percent, its first gain in four days, and the MSCI Emerging Markets Index climbed 1 percent.
The Australian dollar strengthened at least 1.7 percent against the U.S., Japanese and euro currencies and the South Korean won gained against more than 0.8 percent versus the dollar, euro and yen on the prospect of increased export demand from China, the world’s fastest-growing major economy.
“Over recent weeks, the commodities-sensitive markets have actually held up very well,” said Fritz Meyer, a Denver-based senior market strategist at Invesco Inc. “That to me is a sign that the global economic expansion is continuing at a fairly healthy clip,” he said. “What we’re seeing is a reduced level of fear with respect to China specifically.”
Spanish ten-year securities advanced, sending yields down eight basis points to 4.32 percent, as the country’s borrowing costs fell at an auction of 6 billion euros ($7.8 billion) of bills. Spain’s IBEX 35 Index erased earlier declines to close up 1.3 percent, its first advance in four days. Banco Santander SA contributed the most to the gain, rising 2.1 percent.
Spanish Finance Minister Elena Salgado’s comments on bank stress tests were taken out of context, her spokeswoman said, after El Pais cited her as saying that no lenders had failed the tests. The minister was not revealing any results of stress tests on Spanish banks, said the spokeswoman, who declined to be named in line with policy.
Greek two-year yields rose 11 basis points to 9.96 percent after the government sold 1.95 billion euros of 13-week debt.
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