Stocks Rise as Treasuries Retreat on Increase in U.S. Hiring, Greek Swap
Stocks climbed, rebounding from the worst drop of 2012, while Treasuries fell as a report showed U.S. companies boosted hiring and more investors agreed to a Greek debt swap. Natural gas tumbled to a 10-year low.
The Standard & Poor’s 500 Index rose 0.7 percent to 1,352.63 at 4 p.m. in New York and the Dow Jones Industrial Average advanced 78 points. The S&P GSCI index of 24 commodities added 0.7 percent as gasoline, silver and oil rallied. Ten-year Treasury yields increased three basis points to 1.97 percent. The euro gained 0.3 percent to $1.3146 as the shared currency strengthened against 10 of 16 major peers. The Dollar Index, a gauge of the currency against six major peers, lost 0.2 percent.
U.S. companies added 216,000 workers last month, according to data based on payrolls from ADP Employer Services. Investors with holdings amounting to 58 percent of the Greek bonds eligible for the nation’s debt swap agreed to participate, moving the country closer to the biggest sovereign restructuring in history. Equities extended gains on a report the Federal Reserve is discussing a new type of bond-buying program.
“The data coming out of the U.S. is supportive of growth,” Stephen Kylander, Boston-based senior portfolio manager at RBC Global Asset Management (U.S.) Inc., said in a telephone interview. His firm oversees $250 billion in assets. “The valuations aren’t particularly stretched. It’s important that we have stability in Europe. We wouldn’t want to have a significant default in Greece that is not orderly.”
Equities extended gains as the Wall Street Journal reported that Fed officials are considering a program to buy long-term mortgage or Treasury bonds by printing new money, then effectively “sterilize” or tie up the new cash by borrowing it back for short periods at low rates. The aim would be to relieve concern about future inflation, the Journal reported.
Treasuries remained lower after the report, with the two- year yield up two basis points at 0.30 percent and the 30-year yield four basis points higher at 3.12 percent.
“We are paring some of the risk-off trade from yesterday, with the market clearly focused on PSI and what percentage of the Greek bondholders agree to the swap,” said Michael Pond, co-head of interest-rate strategy in New York at Barclays Plc, using the acronym for private-sector involvement in the debt swap. “The Fed’s unlikely to announce something next week, but they are clearly exploring their options for more accommodation should the recent economic momentum not continue.”
The S&P 500 halted a three-day, 2.2 percent retreat. Yesterday’s slide erased more than $1 trillion from global equities as a report showed Europe’s economy shrank and investors awaited details on Greece’s swap.
Today’s report from ADP Employer Services came two days before the Labor Department’s monthly jobs data, which are forecast to show an increase of 225,000 private jobs and total non-farm payrolls growth of 210,000. Separate data today showed consumer borrowing in the U.S. rose more than forecast in January, capping the biggest three-month gain in more than a decade. Credit increased by $17.8 billion to $2.51 trillion, Fed figures showed.
Financial, industrial and consumer-discretionary companies led gains among nine of the 10 main industry groups in the S&P 500 today, climbing at least 1 percent each. Bank of America Corp. and Citigroup Inc. paced the advance among financial companies with gains of more than 3.4 percent each. Apple Inc. ended the session up 0.1 percent, erasing most of a 1.4 percent advance, after the company introduced the new version of its iPad tablet computer, which will be available March 16.
Natural Gas Tumbles
Natural gas futures settled at a 10-year low, falling 2.3 percent to $2.302 per million British thermal units, as the fourth-warmest U.S. winter on record crimped demand for the heating fuel while record production boosted stockpiles.
Brent crude gained 1.7 percent to $124.09 a barrel and West Texas intermediate oil added 1.4 percent to $106.16. Copper climbed 0.8 percent to $3.767 a pound.
The Stoxx Europe 600 Index (SXXP) rebounded 0.6 percent after tumbling 2.7 percent yesterday, its biggest drop since November. Admiral Group Plc surged 10 percent today as the U.K. insurer said full-year profit increase 14 percent. Cobham Plc, a designer of equipment for the aerospace industry, jumped 13 percent as earnings topped estimates.
Emerging Markets, Oil
The MSCI Emerging Markets Index (MXEF) retreated 0.1 percent, heading for a third consecutive decline and the lowest close since Feb. 1. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong slid 1.3 percent.
In European bond markets, 10-year Italian yields lost 13 basis points to 4.94 percent and Spanish yields fell six basis points to 5.09 percent. Ten-year Greek yields were little changed at 36.55 percent.
Greece’s largest banks, most of the country’s pension funds, and more than 30 European banks and insurers including BNP Paribas SA, Commerzbank AG (CBK) and Assicurazioni Generali SpA have pledged to accept the offer. That brings the total so far to at least 120 billion euros ($157 billion), based on data compiled by Bloomberg from company reports and government statements.
Under the rules of the exchange, investors holding at least 50 percent of the eligible bonds must vote on the swap, and 66 percent of those must agree to amend the bonds to enable the government to impose the collective action clauses, Christoph Rieger, head of fixed income strategy at Commerzbank AG, said in a note to clients.
The Greek government said it will use collective action clauses to compel bondholders to accept its debt restructuring if it receives sufficient consents from investors. The goal of the exchange that runs through March 8 is to reduce privately held Greek debt by 53.5 percent, helping to avert a disorderly default.
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