Stocks Trim Gain, U.S. Bonds Rise; Commodities Hold Gain

U.S. stocks trimmed gains as optimism about a drop in jobless claims faded and technology and consumer shares turned lower, while Treasuries erased losses after a $13 billion bond auction. Corn led commodity gains as a report showed global inventories will drop more than expected.

The Standard & Poor’s 500 Index (SPX) increased less than 0.1 percent to 1,432.84 at 4 p.m. in New York after rallying 0.8 percent earlier, paring gains as Apple Inc. extended its retreat from a September record to more than 10 percent. Thirty-year Treasury bond yields fell three basis points to 2.85 percent after climbing as much as five points. The S&P GSCI gauge of commodities added 1.1 percent as corn, natural gas, soybeans and wheat led gains. The dollar fell against 14 of 16 major peers.

Global stocks and commodities extended gains this morning after U.S. applications for jobless benefits unexpectedly fell by 30,000 to 339,000 last week, in a report which may reflect difficulty adjusting the data for seasonal swings at the start of a quarter. Early gains also came after Citigroup Inc. upgraded U.S. equities to overweight, citing central-bank stimulus plans and earnings momentum, and predicted a 9 percent rally in global stocks by the end of next year.

“The economy is improving, we’re doing a better job,” Philip Orlando, the New York-based chief equity strategist at Federated Investors Inc., which oversees about $370 billion, said in a telephone interview. “I think we should be going faster but this is a phenomenal claims number. So now the question is, ‘Is this number real or is it going to get revised away next week?’”

Slump Halted

The S&P 500 rose for the first time in a week. Unemployment claims were forecast to increase to 370,000 last week from 367,000 the previous period, according to the median estimate in a Bloomberg survey of economists. One state accounted for most of the plunge in claims, a Labor Department spokesman said as the data were issued to the press.

Sprint Nextel Corp. (S) jumped 14 percent as Japan’s Softbank Corp. was said to be in talks to buy control of the company. Schlumberger Ltd., Freeport-McMoRan Copper & Gold Inc., Bank of America Corp. and JPMorgan Chase & Co. paced gains that sent commodity and financial shares to the best performances among 10 groups in the S&P 500.

Banks rose the most among 19 industries in Europe after people familiar with the talks said the European Union may push back the deadline for applying tougher capital rules for as long as a year. The Basel Committee on Banking Supervision, the global standard-setting body that prepared the new rules, admitted this week that not all nations will meet the 2013 start date.

Bank Earnings

JPMorgan and Wells Fargo & Co. are scheduled to report quarterly earnings tomorrow. Analysts forecast Wells Fargo, the largest U.S. home lender, will post record profit. Income at banks increased 19 percent in the third quarter, helping limit the S&P 500’s first drop in quarterly earnings in three years to 1.7 percent, according to a Bloomberg survey of analysts.

The S&P 500 has slipped about 2.3 percent since reaching an almost five-year high of 1,465.77 on Sept. 14 after the Federal Reserve announced plans to buy $40 billion in mortgage securities a month to boost growth. The benchmark index (MXEF) is less than 1 percent higher than its 50-day moving average of

The slackening world economy is weighing on sales at companies such as Caterpillar Inc., which cut its forecast for 2015 earnings last month after commodity producers reduced capital spending.

‘Focus Is Shifting’

“It’s the beginning of earnings season and the focus is shifting from the boost that stocks got from provisional liquidity around the world,” Brian Gendreau, a market strategist at El Segundo, California-based Cetera Financial Group Inc., said in a telephone interview. The firm has about $20 billion in assets under management. “We’ve had a string of warnings now from internationally oriented companies that profits and revenues aren’t going to be what they had been. This is coming in a context of a global slowdown in growth.”

U.S. 30-year bond yields decreased for a third straight day. The 30-year U.S. securities sold by the Treasury today drew a yield of 2.904 percent, compared with a forecast of 2.880 percent in a Bloomberg News survey of eight of the Federal Reserve’s primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.49, versus an average of 2.65 for the previous 10 sales.

European Market

The Stoxx Europe 600 Index (SXXP) snapped a three-day slump as luxury goods companies and retailers also climbed. Burberry Group Plc, the U.K.’s largest luxury-goods maker, rallied 13 percent after reporting a partial recovery in retail sales growth since September’s profit warning. Christian Dior SA and Cie. Financiere Richemont SA rose more than 3 percent.

Carrefour SA (CA) climbed 3.7 percent in Paris after the world’s second-largest retailer posted third-quarter sales that beat analyst estimates. Direct Line Insurance Group Plc, a U.K. insurer, added 7.4 percent on the first day of trading following its 787 million-pound ($1.3 billion) initial public offering.

Italy’s 10-year bond yield dropped nine basis points to 5.02 percent after the nation sold 3.75 billion euros ($4.8 billion) of benchmark three-year bonds at 2.86 percent and investors bid for 1.67 times the amount offered, up from 1.49 times last month.

Spain’s two-year notes erased earlier losses, with the yield falling five basis points to 3.22 percent. The nation’s 10-year rates were down four basis points at 5.76 percent. S&P yesterday cut Spain’s debt rating to one level above junk, citing economic and political risks as the government considers a second bailout.

German Outlook

German bunds erased gains after the U.S. jobless claims report, pushing the yield one basis points higher to 1.50 percent. Germany’s leading economic forecasters cut the country’s outlook for growth next year to 1 percent, half the rate of an estimate on April 19. Europe’s biggest economy is beginning to be hit by the debt crisis, said the group that includes Munich’s Ifo institute in its 86-page report.

The euro strengthened 0.4 percent to $1.2929 after weakening for three days. Australia’s dollar rallied for a fourth day, climbing 0.3 percent to $1.0265. The rand extended gains against the dollar amid signs labor unrest that shut gold and platinum mines is easing. The currency has strengthened 2.6 percent in three trading sessions.

Corn Supplies

Corn jumped 5 percent to lead gains in 13 of 24 commodities in the S&P GSCI Index after a government report showed global inventories will drop more than expected as the worst U.S. drought in more than 50 years cuts output by the most since 1996.

Worldwide inventories on Oct. 1 will be 117.27 million metric tons, down from 123.95 million predicted a month ago and 131.54 million estimated this year, the U.S. Department of Agriculture said today. Reserves as a percent of consumption will fall to 13.7 percent, the lowest since 1974, USDA data show. Stockpiles in the U.S., the largest grower and exporter, will fall 37 percent to 15.73 million tons, from last year.

Oil in New York climbed 0.9 percent to $92.07 a barrel amid lingering concern tensions between Syria and Turkey will disrupt supplies from the Middle East.

The MSCI Emerging Markets Index added 0.4 percent, the first gain in four days, as benchmark gauges in Turkey, Hungary, Brazil and South Africa climbed at least 1 percent.

South Korea’s KOSPI (KOSPI) fell 0.8 percent to its lowest level since Sept. 11, as the country’s central bank lowered the benchmark seven-day repurchase rate to 2.75 percent from 3 percent. The Bank of Korea slashed its 2012 economic growth outlook to 2.4 percent from an earlier estimate of 3 percent. Taiwan’s benchmark stock gauge slumped 1.9 percent, falling for a third day.

To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Michael P. Regan in New York at mregan12@bloomberg.net

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

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