U.S. Stocks Gain on Stimulus Speculation; Euro Falls
U.S. stocks rose, paring the Standard & Poor’s 500 Index’s first weekly decline in almost two months, as Federal Reserve Chairman Ben S. Bernanke said the central bank has the ability to take additional steps to boost the economy. The euro weakened and commodities slumped.
The S&P 500 added 0.7 percent to 1,411.13 as of 4 p.m. in New York. The Stoxx Europe 600 Index climbed 0.1 percent and the euro slipped 0.4 percent to $1.2511. Ten-year Treasury yields were little changed at 1.68 percent after a five-day slump. The S&P GSCI Index of commodities lost 0.5 percent as natural gas fell on speculation that a tropical storm won’t result in widespread production cuts in the Gulf of Mexico.
The S&P 500 has climbed 10 percent since June 1 amid optimism that global central banks will take actions to stimulate growth. Bernanke, speaking in a letter dated Aug. 22 to California Republican Darrell Issa, repeated the statement from the Federal Open Market Committee’s Aug. 1 meeting that the Fed will provide “additional accommodation as needed.”
“The Fed is going to keep on giving verbal assurance that they will do something if they need to,” James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management, said in a phone interview. His firm oversees about $320 billion. “The turnaround was tied mainly to Bernanke’s comments.”
U.S. and European stocks fell earlier in the day after two central bank officials said the ECB may wait until Germany rules on the legality of Europe’s permanent bailout fund before unveiling details of a plan to buy government bonds.
Germany’s Constitutional Court is set to rule on Sept. 12 and investors looking for Draghi to announce a definitive purchase program at his Sept. 6 press conference might be disappointed, according to the officials, who spoke on condition of anonymity because the deliberations are not public.
The Stoxx 600 (SXXP) fell 1.8 percent for the week, its first since the beginning of June. The S&P 500 posted a weekly drop of 0.6 percent. U.S. trading volume and volatility has dropped this month as vacationing traders await policy clues from the Fed’s annual summit in Jackson Hole, Wyoming, and a European Central Bank meeting in September.
Autodesk Inc. (ADSK) plunged 16 percent. The software maker lowered its annual sales forecast and said it plans to cut jobs. Eli Lilly & Co. added 3.4 percent as the company said its experimental Alzheimer’s treatment slowed the decline of cognition in some patients even though it failed to meet the primary goals of two large studies.
The dollar gained against 15 of its 16 major counterparts. Minutes of the U.S. central bank’s latest policy meeting released Aug. 22 showed officials remain supportive of a third round of asset purchases under quantitative easing as unemployment has been mired at more than 8 percent since 2009.
Germany’s 10-year yields fell two basis points to 1.36 percent, after reaching 1.32 percent, the lowest since Aug. 3. The U.S. 10-year note yield slid 13 basis points this week, the most since the five days ended June 1.
Natural gas fell 3.8 percent as the National Hurricane Center said Tropical Storm Isaac may become a hurricane off the west coast of Florida in about four days. The Gulf accounts for about 6.3 percent of U.S. marketed gas production. Offshore platforms are concentrated closer to the Louisiana, Mississippi and Texas coasts. Oil retreated 0.4 percent to $95.90 a barrel in New York.
“We’re not talking about a Category 4 or 5 storm,” said Brad Florer, a trader at Kottke Associates LLC in Louisville, Kentucky. “Most people are looking at the worst-case scenario of some evacuations and temporary shut of production. It doesn’t have the same impact it used to have because most production is not in the Gulf.”
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