Stocks Gain With Commodities as Dollar, Treasuries Drop

U.S. stocks and commodities rallied, while the dollar and Treasuries fell, as American jobless claims climbed less than forecast and the European Central Bank said it’s ready to buy bonds once necessary conditions are met.

The Standard & Poor’s 500 Index added 0.7 percent to close at 1,461.40 at 4 p.m. in New York. Oil jumped the most in two months, recouping most of yesterday’s 4.1 percent plunge, as tension between Syria and Turkey escalated. Gasoline climbed 5.1 percent and gold touched the highest price in 11 months. The dollar weakened against 15 of 16 major peers, while 10-year Treasury yields added six basis points to 1.67 percent.

Treasuries fell as stocks advanced and investors dissected last night’s U.S. presidential debate. Government data showed 367,000 people filed initial jobless claims last week, below the median forecast of 370,000. A report tomorrow is projected to show the U.S. added 115,000 jobs last month and the unemployment rate increased to 8.2 percent. The ECB left its benchmark rate at 0.75 percent and President Mario Draghi put the onus on Spain to decide whether it wants a bailout.

“The jobless claims report was OK and Draghi is signaling he will do whatever it takes, so I’m not expecting him to take his foot off the accelerator,” Philip Orlando, the New York- based chief equity strategist at Federated Investors Inc., which oversees about $370 billion, said in a phone interview. “Every data point in the U.S. will be viewed through a market prism and a political prism now.”

Debate Aftermath

The S&P 500 has rallied 16 percent this year as policy makers around the world attempted to safeguard the economic recovery. The benchmark index reached the highest level since 2007 on Sept. 14 (SPX) after Federal Reserve Chairman Ben S. Bernanke said the central bank will buy $40 billion of mortgage securities a month, a third round of quantitative easing nicknamed QE3 by investors.

Fed officials said they could change the size of the purchases to reduce the risks associated with the program, such as disrupting financial markets and spurring inflation, according to minutes from their last meeting released today.

Mitt Romney aggressively challenged President Barack Obama in their first debate last night and polls conducted in the immediate aftermath by CNN and CBS News both indicated voters thought Romney had won the encounter at the University of Denver. Obama’s odds of re-election fell to 66.9 percent from 74 percent before the debate and a peak of 78.9 percent on Sept. 29, according to Intrade.com.

Romney has said that he wouldn’t appoint Bernanke to a third term, while his running mate, House Budget Committee Chairman Paul Ryan of Wisconsin, has said he doesn’t want the Fed to provide additional stimulus.

‘Not a Fan’

“The market’s got to start pricing in the possibility of a Romney victory, and if that’s the case then things are going to change a lot,” said Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York, one of the 21 primary dealers that trade with the Fed. “Romney’s going to go after Bernanke. He’s not a fan of the QE, printing money.”

The S&P 500 rose for a fourth day as financial, commodity and consumer companies led gains among the index’s 10 main groups.

Bank of America Corp. and Citigroup Inc. rose at least 2.6 percent to pace an advance in diversified financial shares, which led gains among 24 industries. Romney said last night that the Dodd-Frank overhaul of the financial industry has made banks reluctant to lend and the industry needs clearer regulations. Consol Energy Inc. and Peabody Energy Corp. jumped more than 4 percent as analysts forecast an end to four straight quarters of declines in the price of coal and Romney said in the debate last night that he likes coal.

Retail Sales

TJX Cos. and Target Corp. gained after the retailers reported monthly same-store sales that topped estimates. Ryder System Inc. jumped 6 percent after SunTrust Robinson Humphrey advised buying the shares. Sprint Nextel Corp. slid 2.1 percent after the stock was downgraded by Robert W. Baird & Co. Avery Dennison Corp. fell 4.4 percent after 3M Co. scrapped an agreement to buy its office products business.

Some traders pointed to a bullish bet on the S&P 500 in the options market as helping to fuel today’s rally. One investor bought 11,000 calls expiring tomorrow giving the right to buy the index at 1,465, 1 percent above yesterday’s closing level, Chris Rich, head options strategist at JonesTrading Institutional Services LLC in Chicago, said in an interview.

The bullish options surged 196 percent to $3.70 and were the most-traded contract on the benchmark gauge today.

“People are blaming the move higher in the S&P 500 on the options trade,” Rich said in an interview. “Everyone was talking about it.”

Factory Orders

Another report today showed orders placed with U.S. factories fell in August by the most in more than three years, signaling that slowdowns in business investment and exports restrained the economic expansion. The 5.2 percent decrease in bookings was less than the median forecast of economists in a Bloomberg News survey predicting a decline of 5.9 percent.

Tomorrow’s jobs data will be the second-to-last of the Labor Department’s monthly reports before U.S. voters vote for their next president on Nov. 6.

“The most important message will be from the employment data from the U.S. on Friday,” said Herbert Perus, who helps oversee about $36 billion as head of equities at Raiffeisen in Vienna. “This will be crucial.”

The yen fell against 13 of its 16 major peers as the Bank of Japan started a two-day meeting after expanding stimulus last month. Price swings in major currencies have waned, with the JPMorgan G7 Volatility Index sliding as low as 7.69 today, the lowest level since October 2007.

European Markets

Among European stocks, Halfords Group Plc (HFD) jumped a record 14 percent after the U.K. retailer of bicycles and car parts said earnings will be in the upper half of its previous forecast. Nobel Biocare Holding AG slid 4.3 percent in Zurich as the world’s second-biggest maker of dental implants said full- year profit will be hurt by a deteriorating Japanese market.

Spanish government bonds stayed lower after the nation sold 3.99 billion euros ($5 billion) of securities. It auctioned 3.75 percent notes maturing in 2015 at an average yield of 3.956 percent, up from 3.845 percent at the last sale on Sept. 20. It also sold notes maturing in 2014 at 3.282 percent and 2017 securities at 4.766 percent.

The nation’s three-year note yields rose six basis points to 3.98 percent, while the rate on the two-year security was five basis points higher at 3.28 percent.

Indian stocks rallied to the highest level in more than a year the cabinet considered further measures to open up Asia’s third-largest economy. The cabinet approved a proposal to allow overseas companies to own as much as 49 percent in local insurers versus the current limit of 26 percent, Ajay Maken, minister of sports, said in New Delhi. The BSE India Sensitive Index, or Sensex, jumped 1 percent.

Commodities Rally

The S&P GSCI gauge of 24 commodities rose 2.5 percent, the biggest gain in two months. West Texas Intermediate oil advanced 4.1 percent to $91.71 a barrel in New York. Crude rebounded as Turkey’s parliament authorized the government to order military action in Syria. A mortar bomb fired across the border yesterday killed five Turks. Oil slid yesterday after the Energy Department said output rose to 6.52 million barrels a day last week, the most since December 1996.

Gold futures advanced 0.9 percent to $1,796.50 an ounce and climbed to as high as $1,797.70, the highest for a most-active contract since Nov. 9.

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

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

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