Most U.S. Stocks Rise, Dollar Pares Gain; Treasuries Fluctuate
U.S. stocks rose, halting a two-day slide, as a rally in oil lifted energy producers and concern eased that Ireland’s debt crisis will worsen. Treasuries fluctuated following a $16 billion 30-year bond auction, while the dollar trimmed gains.
The Standard & Poor’s 500 Index increased 0.4 percent to 1,218.71 at 4 p.m. in New York. The 30-year yield was little changed at 4.25 percent and the Dollar Index climbed 0.3 percent, paring an earlier 0.9 percent rally as the U.S. currency erased gains versus the euro. Irish 10-year bond yields rose for a 12th day and touched a record 622 basis points more than German bunds. The Thomson Reuters/Jefferies CRB commodities index snapped a nine-day rally, its longest since 2005.
The S&P 500 halted a retreat from last week’s two-year high as oil climbed 1.3 percent to $87.81 a barrel, the most since 2008, as government data showed an unexpected drop in supplies. Financial markets fluctuated for much of the day as investors awaited a Group of 20 nations meeting in Seoul tomorrow, where leaders will discuss global imbalances in the wake of a Federal Reserve plan to buy $600 billion in Treasuries to spur growth.
“Currency traders have reversed bets on the sovereign debt fears, and you see that translating into a weakening dollar and stronger equity markets,” said Michael James, a managing director at Wedbush Morgan Securities in Los Angeles. “Ireland’s been the focus of sovereign debt concerns over the last weeks, but the market seems to be weathering those fears.”
Concern over the Irish debt crisis eased after the nation’s central bank Governor Patrick Honohan said he’s convinced the nation will be able to return to bond markets in 2011 as the government steps up austerity measures to lower the budget deficit and restore investor confidence.
About two stocks gained for each that fell on U.S. exchanges. Citigroup Inc. and Chevron Corp. climbed more than 1.9 percent each to lead financial and energy companies to the top gains among 10 groups in the S&P 500.
Boeing Co. slid 3.2 percent, limiting the Dow Jones Industrial Average’s advance, after the world’s largest aerospace company suspended test flights of the 787 Dreamliner following a fire that forced an emergency landing. The 30-stock Dow rose 10.29 points, or 0.1 percent, to 11,357.04.
A presidential commission’s leaders proposed a $3.8 trillion deficit-cutting plan that would cut Social Security and Medicare, reduce income-tax rates and eliminate tax breaks including the mortgage-interest deduction. The co-chairmen of the panel appointed by President Barack Obama suggested reducing Social Security spending by raising the retirement age to 68 in about 2050 and 69 in about 2075. The plan also would slow the rate at which benefits grow. The savings would come between 2012 and 2020.
‘Better Start Thinking’
“This country’s out of money and we better start thinking,” said co-chairman Erskine Bowles. Without “tough choices,” he said, “we’re on the most predictable path toward an economic crisis that I can imagine.”
U.S. stock-index futures erased losses in premarket trading after the Labor Department said applications for jobless benefits declined by 24,000 to a four-month low of 435,000 in the week ended Nov. 6, lower than the median forecast in a Bloomberg News survey. The trade deficit narrowed more than forecast in September, the Commerce Department said.
The yield on 10-year Treasuries slipped one basis point to 2.65 percent, erasing gains after the Fed announced plans for 18 open-market operations to buy $105 billion of debt during the next 30 days as it expands its policy of quantitative easing.
The U.S. sold $16 billion of the 30-year bonds today at a yield of 4.32 percent, compared with the average forecast of 4.288 percent in a Bloomberg News survey of eight of the Fed’s 18 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.31, the lowest since November 2009.
Bidding for the $24 billion of 10-year notes sold yesterday amounted to 2.80 times the securities sold, the least since February.
Irish bonds fell for a 12th day, extending their longest stretch of declines since at least 2007. LCH Clearnet Ltd. said today it will raise margin requirements for customers trading Irish government bonds after debt yields soared. Ireland’s Honohan said investors remain concerned about problems “hiding” within the nation’s banks.
“I sense a concern in the market that some other problems might be hiding somewhere,” Honohan, who is a member of the European Central Bank’s Governing Council, said at the Irish parliament in Dublin today. “Attention has naturally focused on the residential mortgage book, and the scale of the loan-losses that need to be allowed for here,” he said. “There is nothing else hidden in banks.”
The yield on the Irish 10-year bond jumped 70 basis points to 8.64 percent, according to Bloomberg generic yields. The difference in yield, or spread, between Portuguese 10-year debt and bunds widened 24 basis points to 460 basis points. The nation sold 1.24 billion euros ($1.7 billion) of 2016 and 2020 bonds. Germany and Italy also sold securities today.
The pound strengthened 0.8 percent against the dollar to trade at $1.6117 after the Bank of England said inflation is likely to fall back toward its 2 percent target over a two-year forecast period. The yuan gained as much as 0.17 percent to 6.6325 per dollar, the highest level since the central bank unified official and market exchange rates at the end of 1993.
Cotton futures for March delivery fell 6 cents, the maximum allowed by the exchange, or 4.1 percent, to $1.4111 a pound on ICE Futures U.S in New York. Earlier, the fiber touched a record $1.5195, the highest level in 140 years of trading.
The MSCI Emerging Markets Index slipped 0.4 percent. Hungary’s BUX index tumbled 4.7 percent, the most among global equity indexes, after a draft of the 2011 budget indicated a crisis tax on companies may be extended two years. Russia’s Micex index lost 1.3 percent. China’s Shanghai Composite Index fell 0.6 percent, its second straight decline, and Philippine Stock Exchange Index slid 1.6 percent, the most since August.
China banks’ reserve requirements will increase 0.5 percentage points from Nov. 16, the People’s Bank of China said in a statement on its website. The announcement followed media reports today of increases for selected banks.
Inflows of cash from monetary easing abroad and investors speculating on gains in the yuan threaten to worsen Chinese inflation forecast to have risen to a two-year high in October. The trade imbalance and currency curbs that have pushed China’s foreign-exchange reserves to $2.65 trillion will be discussed by Group of 20 leaders meeting in Seoul from tomorrow.
“There is no doubt that China is on its way to further tightening,” said Danny Yan, Hong Kong-based fund manager at Taifook Asset Management, which oversees about $400 million. “The whole world is flooded with capital that has nowhere to go.”
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