S&P 500 Extends Longest Rally Since 2010; Treasuries Rise

The Standard & Poor’s 500 Index (SPX) rose for a sixth day, the longest rally since 2010, amid speculation the Federal Reserve will pursue more stimulus measures. Treasuries rose and commodities fell as Chinese and French data added to signs the global economy is slowing.

The S&P 500 gained 0.2 percent to 1,405.87 as of 4 p.m. in New York, reversing a 0.5 percent drop to close at its highest level since April 3. The yield on the 10-year Treasury note fell three basis points to 1.66 percent after yesterday touching the highest level since May. Natural gas slid 5.9 percent to lead commodities lower. Corn slipped from a record and wheat lost 2.8 percent. The euro pared an early loss versus the dollar.

Stocks opened lower after China’s exports increased 1 percent in July from a year earlier, trailing all estimates in a Bloomberg survey of economists, and French industrial output stagnated in June from May. Federal Reserve Bank of San Francisco President John Williams said lack of progress in reducing unemployment and the slow economic recovery have convinced him it’s time for the central bank to undertake more quantitative easing, the San Francisco Chronicle reported today.

“The weaker the data, the higher the likelihood of stimulus from central banks,” said Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion. “The weakness in China is likely to prompt a move there,” he said. “While the Fed has been clear it will do anything to support growth, some people tend to think it’s inevitable.”

Five Weeks

The S&P 500 extended its rebound from a five-month low in June to 10 percent. The index climbed 1.1 percent over the past five days to cap a fifth straight weekly advance, its longest rally since March, and extend this year’s gain to 12 percent.

Costs to protect against further declines decreased. The Chicago Board Options Exchange Volatility, the benchmark gauge of U.S. options prices known as the VIX, slipped 3.5 percent to 14.74, the lowest level since March 26.

Yahoo! Inc. (YHOO) retreated 5.4 percent. Chief Executive Officer Marissa Mayer has embarked on a strategy review that could mean the company alters plans to return to shareholders the proceeds from the sale of Yahoo’s stake in Alibaba Group Holding Ltd., Yahoo said late yesterday in a regulatory filing.

Monster Beverage Corp. sank 11 percent as the company disclosed a probe by an unspecified attorney general. Chesapeake Energy Corp. lost 3.1 percent as it received a subpoena from the antitrust office. Research In Motion Ltd. (RIMM) climbed 6.3 percent as two people familiar with the situation said the company’s enterprise-services unit has attracted the interest of International Business Machines Corp.

European Markets

The Stoxx Europe 600 Index (SXXP) slipped 0.1 percent, trimming this week’s advance to 1.6 percent. The gauge has climbed for 10 straight weeks, the longest streak since January 2006. Hannover Re, the world’s fourth-biggest reinsurer, dropped 2.4 percent as second-quarter profit declined 13 percent because of unrealized losses on investments.

“Whilst markets have recently been rallying on bad news -- in the expectation that it will lead to further stimulus from the central banks -- the deterioration in the fundamentals is becoming a bit harder to ignore,” said Jonathan Sudaria, a trader at Capital Spreads in London. “Traders may be disappointed if their thirst for stimulus isn’t satiated as soon as they expect.”

Treasury Yields

Ten-year Treasury yields fell for the first time in six sessions. The 10-year yield climbed to 1.73 percent yesterday, surpassing the U.S. inflation rate and offering investors a so- called positive real yield for the first time in 14 months.

The yield on the German 10-year bund declined five basis points to 1.39 percent, with similar-maturity U.K. gilt rates dropping eight basis points to 1.54 percent.

The cost of insuring against default on sovereign debt rose, with the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments climbing 1.7 basis points to 247.

The euro recovered most of a 0.5 percent slump earlier to trade down 0.1 percent at $1.2294 and weakened against 11 of 16 major peers. The yen appreciated versus 15 of its 16 major peers.

Oil dropped 0.5 percent to $92.87 a barrel and natural gas sank 5.9 percent, leading a 0.9 percent decline in the S&P GSCI Index of commodities. Wheat, soybeans and corn have risen the most this year among the 24 commodities tracked by the measure as the drought parched fields across the U.S. Midwest.

Corn Retreats

Corn futures fell the most this month, slipping 1.3 percent to $8.13 a bushel, on signs that record-high prices may erode grain demand by makers of animal feed, ethanol and food products.

While the domestic harvest probably will drop 13 percent to a six-year low of 10.78 billion bushels this year, demand will shrink 10 percent from a year earlier, the U.S. Department of Agriculture said today in a report. Corn futures are up 61 percent since mid-June as the crop conditions deteriorated to the worst since 1988.

The MSCI Emerging Markets Index (MXEF) rose less than 0.1 percent and rallied 2.8 percent for its best gain since February. The Hang Seng China Enterprises Index of mainland companies slid 0.6 percent. Russia’s Micex Index dropped 1 percent.

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: Lynn Thomasson at lthomasson@bloomberg.net

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