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U.S. Stocks Near Four-Year High While Treasuries Rebound

U.S. stocks rose, sending benchmark indexes to near the highest levels in more than four years, amid better-than-forecast economic data. Treasuries halted a four-day drop, pulling 10-year yields down from a three-month high.

The Standard & Poor’s 500 Index climbed 0.2 percent to 1,418.16, less than one point below its highest closing level since May 2008, and the Dow Jones Industrial Average briefly topped its best close since December 2007. Rates on 10-year notes lost two basis points to 1.81 percent after yesterday climbing as high as 1.86 percent, matching their 200-day moving average. The Stoxx Europe 600 Index rose to a 13-month high and Spain’s bonds rallied as concern over the debt crisis eased.

Better-than-forecast data on consumer confidence and leading economic indicators weren’t enough to send the S&P 500 above 1,419.04, its four-year high reached in April. Treasuries still fell for a fourth week, the longest streak since 2010, as improving data reduced demand for the safety of U.S. debt. In Europe, speculation grew that policy makers will take steps to protect the region’s banks, helping the Stoxx 600 extend its rebound from a June low to 17 percent.

“Today’s data is just a couple more pieces of the puzzle that show improvement, but not all that great,” Terry L. Morris, who helps oversee about $2.5 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co., said in a phone interview. “The general attitude is optimistic, maybe more optimism than the market should have.”

Market Leaders

Trading of S&P 500 companies was about 13 percent below the 30-day average and the index swung no more than 0.29 percent from its high to its low of the session, the smallest fluctuation since 2006.

The Dow climbed 25.09 points, or 0.2 percent, to 13,275.20 and rose as high as 13,281.32.

Gap Inc. (GPS) and J.M. Smucker Co. jumped at least 4.8 percent after earnings topped analyst estimates. Apple Inc. rose to a record $648.11 and exceeded $600 billion in market value for the first time after Jefferies & Co. said the company had started production of the iPad mini, a smaller version of its popular tablet.

Marvell Technology Group Ltd. slumped 14 percent after predicting profit that fell short of forecasts.

As the S&P 500 approached its highest level since 2008, the cost of using options to protect against declines in the benchmark index slid to a five-year low. The Chicago Board Options Exchange Volatility Index, the benchmark for U.S. options known as the VIX, sank 5.9 percent to 13.45 today, its lowest level since June 2007.

Economy Data

Today’s reports on U.S. consumer confidence and leading economic indicators added to optimism about the economy after data this week that showed retail sales jumped more than expected and applications for building permits rose to the highest since August 2008.

The Thomson Reuters/University of Michigan preliminary August index of consumer sentiment increased to 73.6, the highest level since May, from 72.3 the prior month. The gauge was projected to be little changed at 72.2, according to the median forecast of 72 economists surveyed by Bloomberg.

The Conference Board’s gauge of the outlook for the next three to six months increased 0.4 percent after a revised 0.4 percent drop in June, the New York-based group said today. Economists projected the gauge would rise by 0.2 percent, according to the median estimate in a Bloomberg survey.

Thirty-year yields today slipped two basis points to 2.93 percent, while rates on two-year debt lost less than one basis point to 0.29 percent.

European Markets

The Stoxx 600 (SXXP) climbed 1.1 percent over five days to cap an 11th straight weekly gain, its longest rally since January 2006. Bankinter SA and Bankia SA rallied more than 2 percent on speculation the European Union will disburse the first installment of a 100 billion-euro ($124 billion) bailout facility to Spain’s lenders. Swiss Life Holding AG (SLHN) jumped 3.1 percent as the biggest Swiss life insurer’s first-half profit exceeded analysts’ estimates

Spanish bonds outperformed all their euro-area peers today, with the nation’s 10-year yield falling eight basis points to 6.44 percent. The rate lost 46 basis points this week, the biggest decline since the five days through July 27. Spain’s two-year yield dropped 22 basis points to 3.77 percent today.

Yield Watch

The two-year yield may fall to as low as 2 percent should the ECB buy debt through its bond-purchase program, said Steven Major, head of fixed-income research at HSBC Holdings Plc in London.

“It’s all about getting those front-end yields stapled to the floor,” Major said in an interview on Bloomberg Television’s “The Pulse” with Maryam Nemazee.

German 10-year yields slipped three basis points to 1.50 percent.

Australia’s dollar declined against 15 of its 16 major peers, weakening 0.9 percent versus the U.S. currency, after the nation’s Treasury said the central bank would be able to ease monetary policy if the currency’s gains are hurting the economy.

The S&P GSCI gauge of 24 commodities was little changed after a three-day rally, with lead, cocoa and wheat leading gains and gasoline, Brent crude and heating oil falling the most.

Oil for September delivery rose 41 cents, or 0.4 percent, to $96.01 a barrel on the New York Mercantile Exchange, the highest settlement since May 11, amid rising tension in the Middle East. The price is up 9 percent in August and 13 percent in the third quarter.

Platinum Rallies

Platinum for October delivery jumped as much as 2.8 percent to $1,475.30 an ounce, the highest since July 6, after 34 people were killed at Lonmin Plc (LMI)’s Marikana platinum mine in South Africa, according to the country’s police commissioner.

The MSCI Emerging Markets Index (MXEF) fell 0.4 percent, capping its first weekly drop in five weeks. South Korea’s Kospi Index lost 0.6 percent, with shares in South Africa, Poland and Taiwan declining. The Hang Seng China Enterprises Index of mainland companies added 0.9 percent, and Turkey’s benchmark gauge climbed 1.3 percent. India’s Sensex rose 0.2 percent, while Russia Micex Index slipped 0.5 percent.

To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Daniel Kruger in New York at dkruger1@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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