Stocks (MXAP) rose, halting a four-day slump in Europe and Asia, and commodities surged as growth in U.S. home sales and durable-goods orders topped forecasts and speculation grew that China will add to economic stimulus. The euro weakened for a third day. Treasuries were little changed.
The Standard & Poor’s 500 Index advanced 0.9 percent to 1,331.85 at 4 p.m. in New York. The Stoxx Europe 600 Index (SXXP) added 1.4 percent and the MSCI Asia Pacific Index rallied 0.7 percent. Energy shares led gains in the U.S. as oil climbed back above $80 a barrel. Spanish and Italian 10-year bonds fell as German Chancellor Angela Merkel reiterated opposition to joint euro- area debt. The euro lost 0.2 percent to $1.2468.
The 1.1 percent increase in orders for durable goods eased concern that American manufacturing was faltering, while growth in pending home sales added to evidence the housing market was recovering. The China Securities Journal said the country may introduce “more proactive” policies to ensure stable growth in the world’s second-largest economy. European leaders prepared for a two-day summit starting tomorrow.
“The economic data was encouraging,” said Walter Todd, who oversees about $940 million as chief investment officer of Greenwood Capital in Greenwood, South Carolina. “It’s important to see that because most recently we’ve had weaker data here and in China while Europe came back to the forefront. Any policy moves out of China would certainly be welcomed. In addition, it’s the end of the quarter and you tend to see some buying around that time.”
Eight of the nine biggest gains in the S&P 500 were energy companies, led by rallies of more than 6 percent in Cabot Oil & Gas Corp., QEP Resources Inc. and WPX Energy Inc. JPMorgan Chase & Co., Bank of America Corp. and Coca-Cola Co. climbed at least 1.7 percent for the biggest gains in the Dow Jones Industrial Average, which jumped 92.34 points to 12,627.01.
Monsanto Co. (MON), the world’s largest seed company, climbed 3.9 percent as earnings exceeded analysts’ estimates. Bristol-Myers Squibb Co. advanced 1.7 percent after the maker of the blood thinner Plavix doubled the size of its share buyback program. Facebook Inc. dropped 2.6 percent after at least 17 firms started to cover the social-networking company, with an average analyst share-price estimate below its initial public offering price of $38 a share.
An index of 11 homebuilders in S&P indexes surged 3 percent and closed at the highest level in almost four years. The index of pending home resales climbed 5.9 percent to 101.1, matching a two-year high reached in March, after a 5.5 percent decline in April, figures from the National Association of Realtors showed. The median forecast of economists called for a 1.5 percent gain in May.
Bookings for U.S. durable goods increased for the first time in three months, the Commerce Department said. The median forecast of 76 economists surveyed by Bloomberg News called for a 0.5 percent gain. Excluding orders for transportation equipment, which can be volatile, bookings for goods meant to last at least three years advanced 0.4 percent.
Today’s housing and durable-goods data helped assuage concern that the U.S. economic recovery was weakening.
“The U.S. does look better than Europe, other places in the world, clearly,” Gregory Peters, chief cross-asset strategist at Morgan Stanley, told Bloomberg Television. “We’ve seen a lot of benefits from that, so a lot of flows into the U.S. But I think the story is that investors are hiding out in U.S. equities, U.S. risk markets, at a time when the U.S. economy is slowing, we’re facing the fiscal cliff, and earnings expectations are way too high.”
Concern that Europe’s crisis will snuff out earnings growth sent the cost of protecting against losses in the S&P 500 to a five-year high. Puts protecting against a 10 percent decline in the benchmark gauge for American equities cost 1.73 times more than calls betting on a 10 percent gain, according to data on three-month contracts compiled by Bloomberg. The price relationship known as skew rose to 1.95 last week, the highest level since July 2007.
The Federal Reserve reduced its estimate last week for expansion in gross domestic product and U.S. consumer confidence dropped for a fourth month in June. The S&P 500 lost 6.3 percent from the end of March through yesterday, leaving it poised for the first retreat in three quarters. Analysts forecast earnings declined 1.1 percent in the second quarter, the first decrease since 2009.
The Stoxx 600 rebounded from a four-day, 2.8 percent retreat as banks and energy companies led gains. Spain’s Bankia SA and Italy’s Banca Popolare SC surged at least 4.8 percent to help lead gains. Barclays Plc rallied 1.9 percent even after it was fined 290 million pounds ($453.2 million) for submitting false London and euro interbank offered rates.
Portugal Telecom SGPS SA climbed 3.1 percent after announcing a 200 million-euro ($250 million) share buyback. Glencore International Plc shares fell 1.5 percent after target Xstrata Plc’s second-largest shareholder asked for a higher bid.
Spanish 10-year yields increased five basis points to 6.93 percent, while Italian 10-year rates added two points to 6.20 percent after earlier declining nine basis points.
Germany’s Merkel shut the door to joint euro-area bonds as a means of lowering Spain’s borrowing costs, saying they are the “wrong way” to achieve the greater European integration needed to stem the debt crisis. Speaking three hours after Spanish Prime Minister Mariano Rajoy made a plea for help from tomorrow’s European summit, Merkel said that euro bonds, euro bills and debt redemption funds are unconstitutional in Germany and economically “wrong and counterproductive.”
“At some point, the Germans are going to decide, ’do I take the credit risk of backstopping Italian and Spanish debt in exchange for some loss of national fiscal sovereignty by Italy and Spain?’” Nouriel Roubini, the co-founder and chairman of Roubini Global Economics, told Bloomberg Television’s “Surveillance.” “In which case, the euro zone has a chance to survive. Or otherwise this thing may become disorderly in the next few months.”
Cocoa, lean hogs, sugar and corn rallied at least 1.4 percent as 15 of 24 commodities tracked by the S&P GSCI Index gained, sending the index up 0.8 percent for a fourth straight gain. The commodities gauge has rebounded after slumping to the lowest level since October 2010 on June 21.
Natural gas trimmed earlier gains, trading up 0.3 percent after rallying as much as 6.5 percent. The fuel has surged 10 percent in five days. The National Weather Service predicted temperatures will be above normal east of the Rocky Mountains through July 9, spurring demand for the power-plant fuel as air- conditioning use increases.
The MSCI Emerging Markets Index (MXEF) advanced 0.8 percent, its steepest gain since June 19. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong advanced 0.7 percent. Benchmark gauges in Russian, Turkey, Indonesia, Thailand and the Philippines gained more than 1 percent.
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