Stocks, Euro, Commodities Gain as Treasuries Fall on Greece Austerity Deal
Stocks and the euro rose, Treasuries fell and commodities extended their longest rally of the year as Greek politicians agreed on austerity plans needed to qualify for international aid and U.S. jobless claims decreased.
The Standard & Poor’s 500 Index increased 0.2 percent to close at a seven-month high of 1,351.95 at 4 p.m. in New York. The Dow Jones Industrial Average rose 6.51 points to 12,890.46, the highest since May 2008. The euro strengthened 0.2 percent to $1.3287, near a two-month high. Thirty-year Treasury yields climbed to a three-month high following an auction. The S&P GSCI Index of 24 commodities advanced for a fifth straight day as industrial metals led gains and oil approached $100 a barrel.
Political leaders in Athens announced an agreement that may clear the way for a deal to cut the nation’s debt and win its second rescue in two years. European finance chiefs were set to defer ratifying a 130 billion-euro ($173 billion) rescue for Greece, pressing the government in Athens to put the newly struck austerity plan into action.
“It looks like Greece is on a path to address its issues,” Michael Finnegan, chief investment officer at Principal Funds Inc. in Des Moines, Iowa, said in a telephone interview. His firm oversees $62.9 billion. “Everybody realizes what needs to get done. Obviously there are political challenges, but the consequences if they don’t are just too severe.”
Technology shares rose 1 percent as a group to lead gains among the 10 main industries in the S&P 500, while health-care, utility and financial shares declined. Akamai Technologies Inc., the operator of a server network that lets businesses speed data delivery, surged 11 percent as sales beat estimates. Visa Inc., the biggest payments network, rose 3.8 percent to a record $112.42 after profit soared as consumers increased use of credit and debit cards.
The KBW Bank Index slipped 0.3 percent as 18 of its 24 stocks declined. Five U.S. lenders, including Citigroup Inc., Bank of America Corp. (BAC), JPMorgan Chase & Co. and Wells Fargo & Co., will pay more than $25 billion in the biggest civil settlement involving states and the federal government to end a probe of abusive foreclosure practices stemming from the collapse of the housing bubble. Citigroup lost 1.7 percent, Bank of America increased 0.6 percent, JPMorgan lost 1.2 percent and Wells Fargo slipped 0.2 percent.
The S&P 500 has advanced in six of the last seven sessions, extending its rebound from its 2011 low to 23 percent, and is up 7.5 percent in 2012 for its best start to a year since 1991.
The Stoxx Europe 600 Index increased 0.2 percent, halting a three-day retreat. Daimler AG, the maker of Mercedes-Benz cars, jumped to the highest in six months after reporting a 39 percent increase in quarterly profit. Credit Suisse Group AG fell 3.5 percent after posting an unexpected loss. The MSCI Emerging Markets Index was little changed after climbing to a six-month high yesterday.
Italian, Spanish and French bonds advanced, while German bunds and U.K. gilts declined. Italian 10-year yields decreased 10 basis points to 5.48 percent, the lowest since October. Ten- year Spanish yields slipped four basis points to 5.18 percent.
The agreement reached by Greek political leaders to win the nation’s second bailout may be “analytically questionable,” Pacific Investment Management Co.’s Mohamed A. El-Erian said.
“It is very unlikely to lead to growth, jobs, financial stability and new investments,” El-Erian, chief executive and co-chief investment officer of the world’s biggest manager of bond funds, said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “This agreement will be very difficult to sell when the principals, those who have agreed, have to go to their constituents.”
The euro strengthened against 13 of 16 major peers, climbing more than 0.8 percent against the Japanese yen and South African rand. The European Central Bank kept interest rates on hold at a policy meeting and ECB President Mario Draghi said surveys confirm “signs of stabilization” in the region. The dollar weakened against nine of 16 major peers.
Treasuries fell as the U.S. sale of $16 billion of 30-year bonds was met with lower-than-average demand. The bonds drew a yield of 3.240 percent, compared with a forecast of 3.231 percent in a Bloomberg News survey of nine of the Federal Reserve’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.47, compared with an average of 2.66 for the previous 10 sales. Current 30-year bond yields reached a three-month high, rising three basis points to 3.18 percent.
“They are among the most dangerous of assets,” Buffett said in an adaptation of his annual letter to shareholders that appeared today on the website of Fortune magazine. “Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as these holders continued to receive timely payments of interest and principal.”
Treasuries also retreated after initial U.S. jobless claims unexpectedly decreased by 15,000 last week to 358,000, reducing demand for haven assets. The Bloomberg Consumer Comfort Index rose to minus 41.7 in the period to Feb. 5 from minus 44.8 the previous week.
Fifteen of 24 commodities in the S&P GSCI Index advanced, with zinc, copper, lead and aluminum up more than 1.5 percent. Crude oil climbed 1.1 percent to $99.84 a barrel.
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