Stocks Rally as Spanish Bonds Gain, Treasuries Retreat; Crude Oil Surges

Stocks (SXXP) and commodities rose, while Treasuries slid, as borrowing costs fell for Spain and France and U.S. jobless claims matched a four-year low. Oil extended gains, tempering the rally in stocks (SXXP), on reports of a pipeline explosion in Saudi Arabia.

The Standard & Poor’s 500 Index advanced 0.6 percent to 1,374.09 at 4 p.m. in New York, returning to an almost four-year high after yesterday’s retreat. The yield on Spain’s two-year notes dropped for an 11th day, losing 13 basis points to 2.19 percent. The 10-year Treasury (USGG10YR) yield increased six basis points to 2.03 percent. The S&P GSCI index of commodities climbed 1.4 percent as oil and industrial metals rallied.

Financial shares led gains after Spain and France sold 12.5 billion euros ($16.7 billion) of bonds as the European Central Bank’s loans to banks helped spur demand. Euro-area finance ministers authorized the region’s bailout fund to issue bonds for the Greek debt restructuring, while the International Swaps & Derivatives Association said $3.25 billion in Greek credit- default swaps won’t be triggered. Initial jobless claims fell 2,000 to 351,000 last week, less than economist estimates.

“The economy is slowly getting better,” said Matt Lloyd, who oversees $8 billion as chief investment strategist at Advisors Asset Management Inc. in Monument, Colorado. “When people have much more negative expectations, it allows for outperformance. That’s what’s catching investors off guard.”

JPMorgan Chase & Co., Bank of America Corp. and Pfizer Inc. rose at least 1.9 percent to lead gains in the Dow Jones Industrial Average (INDU), which increased 28.23 points, or 0.2 percent, to 12,980.3 after surging as much as 81 points. All 10 of the main industry groups in the S&P 500 advanced except for companies that sell consumer staples.

Gap, GM

Gap Inc. (GPS), the largest U.S. clothing chain, surged 7.2 percent as same-store sales beat estimates. General Motors Co. climbed 1.7 percent after reporting a surprise U.S. sales gain, while Ford Motor Co. (F) jumped 2.3 percent after light-vehicle sales increased a more-than-estimated 14 percent in February. Kroger Co. advanced 2.7 percent after the largest U.S. grocery- store chain forecast earnings that topped projections.

UBS AG raised forecasts for the S&P 500 and its companies’ earnings amid improvement in the economy. Chief U.S. market strategist Jonathan Golub’s year-end forecast for the benchmark gauge rose to 1,475 from 1,325. The S&P 500 (SPXL1) has the potential to reach 1,700 by the end of the year, pushed higher as economic growth surprises investors, Birinyi Associates Inc. said in a report.

Israel Buys Stocks

The Bank of Israel will began a pilot program to invest a portion of its foreign currency reserves in U.S. equities. The investment, which in the initial phase will amount to 2 percent of the $77 billion reserves, or about $1.5 billion, will be made through UBS and BlackRock Inc., Bank of Israel spokesman Yossi Saadon said in a telephone interview today. At a later stage, the investment is expected to increase to 10 percent of the reserves.

Stocks briefly pared gains today after the Institute for Supply Management’s factory index fell to 52.4 in February from 54.1 a month earlier. Fifty is the dividing line between growth and contraction, and economists surveyed by Bloomberg News projected the gauge would climb to 54.5. Another report showed consumer spending rose 0.2 percent in January, less than the 0.4 percent increase forecast by economists in a Bloomberg survey.

European Stocks

About three shares rose for every one that fell in the Stoxx Europe 600 Index, (SXXP)which climbed 1 percent as results from Adecco SA and WPP Plc beat estimates. Adecco SA surged 8.5 percent. WPP gained 3 percent after saying revenue from continuing businesses will grow 4 percent this year as the London Olympics and U.S. presidential elections buoy the industry.

The difference in yield investors demand to own Spanish 10- year bonds rather than benchmark German bunds fell 17 basis points. The yield on France’s 10-year bond slid 11 basis points, narrowing the spread with bunds to 91 basis points.

Italian two-year note yields fell 38 basis points to 1.76 percent, dropping below 2 percent for the first time since October 2010.

The yield on Greece’s 10-year bond rose 165 basis points to a record 36.44 percent. The ISDA made its decision on Greek default swaps after it was asked to rule whether part of the nation’s $170 billion bailout was a credit event. The decision was unanimous, ISDA said.

Bailout Progress

Euro-area finance ministers authorized the region’s bailout fund to raise money for Greece’s bond exchange, the first step in releasing funds from a 130 billion-euro ($173 billion) rescue package. Greece has passed all required legislation and the ministers “note with satisfaction” the progress achieved, said Luxembourg Prime Minister Jean-Claude Juncker in a statement after chairing a meeting of the finance chiefs in Brussels today. They gave the go-ahead to the European Financial Stability Facility to issue bonds to finance their role in the debt swap.

Crude oil for April delivery rose $1.77 to settle at $108.84 a barrel on the New York Mercantile Exchange before extending gains to as high as $110.55 after the floor closed. The report of the Saudi pipeline blast, which appeared on English-language websites from the Middle East, explained the rise in the oil market after 2:30 p.m. New York time, said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy.

Saudi Arabia said there was no sabotage to its oil facilities in the Qatif region. The statement came from Major General Mansour Al-Turki, a spokesman for the Ministry of Interior, after reports of a fire near the Ras Tanura refinery.

Commodity Leaders

Silver, brent crude and gasoline climbed more than 2.5 percent to lead gains among 17 of 24 commodities in the S&P GSCI index. Copper rallied 1.3 percent to $3.9315 a pound. Gold futures jumped 0.6 percent to $1,722.20 an ounce, rebounding from its biggest drop of the year.

Commodities, led by oil, beat stocks, bonds and the dollar last month for the first time since July as the EU prepared to embargo Iranian crude, the U.S. economy improved and China took steps to shore up growth.

The Standard & Poor’s GSCI Total Return Index of 24 raw materials rose 6.5 percent in February, extending the previous month’s 2.2 percent gain, as Brent crude advanced 11 percent. The MSCI All-Country World Index of shares increased 4.8 percent, extending stocks’ best start to a year since 1991. Bonds of all types were little changed on average, according to Bank of America Merrill Lynch’s Global Broad Market Index. The Dollar Index slid 0.6 percent.

The MSCI Emerging Markets Index (MXEF) fell 0.2 percent, dropping from a seven-month high. The Hang Seng China Enterprises Index (HSCEI) slid 1.9 percent on speculation China won’t ease monetary policy further. The BSE India Sensitive Index (SENSEX) retreated 1 percent on concern a wider-than-estimated budget deficit may restrict the central bank’s scope to cut rates and spur growth.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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