Stocks Rise, Led by Retailers, Banks; Treasuries Advance

U.S. stocks rose, erasing early losses, as chain stores gained after retail sales grew more than forecast and JPMorgan Chase & Co. paced a rally in banks before reporting earnings. Treasuries climbed for a third straight day, pushing yields to near their lowest of the year.

The Standard & Poor’s 500 Index increased 0.1 percent to 1,472.34 at 4 p.m. in New York, returning to a five-year high after slipping as much as 0.5 percent earlier. The Dow Jones Transportation Average surged to a record. Ten-year Treasury note yields declined one basis point to 1.83 percent. Platinum jumped 1.6 percent as Anglo American Platinum Ltd. planned to reduce output, while oil fell from a four-month high. The yen rebounded versus the dollar and euro.

Retailers in the S&P 500 climbed 1 percent as a group for the second-biggest gain among 24 industries after Commerce Department data showed sales increased 0.5 percent in December, more than twice the median forecast of economists in a survey. JPMorgan rallied 1 percent as the KBW Bank Index climbed 0.7 percent. Earlier losses in stocks came amid concern U.S. lawmakers will fail to agree on a plan to raise the debt ceiling.

“The retail data is good news for economic expansion,” said Peter Jankovskis, who helps oversee $3 billion of assets as co-chief investment officer at Lisle, Illinois-based Oakbrook Investments LLC. He spoke in a telephone interview. “It’s encouraging. We have the earnings season going on, people are on wait-and-see mode,” he said. “There’s a lot of rhetoric on the debt-ceiling front. Though it’s probably a bit early to start getting concerned about that.”

Market Movers

Limited Brands Inc., Abercrombie & Fitch Co. and J.C. Penney Co. rose at least 2 percent to pace gains in retailers. Express Inc. rallied 24 percent, the most since its initial public offering in May 2010, after the clothing chain raised its outlook for the fourth quarter and full year 2012.

Microsoft Corp., Caterpillar Inc. and JPMorgan climbed more than 1 percent to lead the Dow Jones Industrial Average (INDU) up 27.57 points to 13,534.89. Nineteen of the 24 banks in the KBW index climbed, with SunTrust Banks Inc. surging 2.9 percent to lead gains.

Wall Street investment banks, loathed by investors in 2011 and hobbled by weak trading last year, are poised for a return to the spotlight. JPMorgan, Goldman Sachs Group Inc. and Morgan Stanley are among U.S. banks reporting fourth-quarter results this week amid a rise in fixed-income and equity trading and the most mergers and acquisitions since 2008. Investment-banking and trading revenue probably jumped 44 percent in the period from a year earlier, according to estimates by Betsy Graseck, a Morgan Stanley analyst in New York.

Apple Slips

Apple Inc. (AAPL) lost 3.2 percent to $485.92, sliding below $500 for the first time in 11 months. The stock slumped for a second day following a Nikkei report that said orders for iPhone 5 parts had been cut about 50 percent following lower-than- expected sales.

Facebook Inc. (FB) slipped 2.7 percent after it introduced a tool for searching information posted to its social network of more than 1 billion users. While Chief Executive Officer Mark Zuckerberg said the new feature could be a “business” in the future, he didn’t outline how it will make money soon, weighing on Facebook shares.

Dell Inc. climbed rose 7.2 percent following a 13 percent jump yesterday after two people with knowledge of the matter said the personal-computer maker is in buyout talks with private-equity firms TPG Capital and Silver Lake. The cost of insuring against default on Dell debt surged.

Transportation Stocks

The Dow Jones Transportation Average, a gauge of 20 railroads, airlines and shipping companies, climbed to the highest level in Bloomberg data going back to 1896. Dow Theory, which stems from observations made by Wall Street Journal founder Charles Dow during the late 1800s, holds that moves by the average must be “confirmed” by the industrial measure, and vice versa, to be sustained. The Dow industrial average closed at its highest level since October and is still more than 4 percent below its 2007 closing record of 14,164.53.

Thirty-year U.S. debt also increased, sending yields down one basis point to 3.02 percent.

Treasury Secretary Timothy F. Geithner warned yesterday of severe economic hardship should Congress fail to raise the debt ceiling that lawmakers have increased or revised 79 times since 1960, including 49 times under Republican presidents. So-called extraordinary measures the Obama administration is taking to avoid breaching the federal debt ceiling will work only until mid-February to early March, Geithner said.

‘More Uncertainty’

President Barack Obama vowed he won’t negotiate over raising the ceiling even as he offered to deal on a separate track with the deficit reduction demanded by Republicans.

“The debt-ceiling concern means more uncertainty in play,” Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York, said in a phone interview. “It’s not good for the economy to have a government shutdown,” he said. “The Congress is going to take us to the brink once again.”

Fitch Ratings said its AAA credit rankings on France, the U.S. and the U.K. are likely to come under pressure this year due to slow economic growth and high debt levels.

‘Formal Review’

The three nations, which all have a negative outlook from the company, have seen gross domestic product struggle to recover from the global financial crisis while debt levels have increased amid efforts to spur growth. A failure of U.S. lawmakers to raise the nation’s debt ceiling would prompt a “formal review” of its credit rating, Fitch said in a press release today.

The yen rallied 0.8 percent after reaching 89.67 per dollar yesterday, the weakest level since June 2010. It strengthened 1.4 percent per euro as it rose against all 16 major peers. Japan Economy Minister Akira Amari warned of harmful effects “if the yen excessively weakens” in Tokyo today.

“The world has gone massively short yen on the idea that Japan is going to be more aggressive with its stimulus under the new prime minister,” saidImre Speizer, an Auckland-based strategist at Westpac Banking Corp. “Comments like Amari’s are likely to spook those holding yen shorts.” A short position is a bet a security will decline in value.

European Yields

Spain’s two-year note yield dropped four basis points to 2.49 percent after the government sold 5.75 billion euros ($7.7 billion) of bills, more than the maximum target of 5.5 billion euros. The 10-yield declined one basis point to 5.02 percent and the rate on similar-maturity Italian bonds rose two basis points to 4.22 percent.

Among European stocks, SAP, the biggest maker of business- management software, sank 3.9 percent after earnings trailed analyst estimates because of rising spending and slowing growth in the Americas. ARM Holdings Plc (ARM) retreated 3.7 percent from a 12-year high as Morgan Stanley cut its recommendation on the designer of smartphone chips.

Lonmin Plc, the world’s third-largest platinum producer, advanced 4 percent in London trading and Impala Platinum Holdings Ltd., the second-largest producer of the metal, climbed 1.7 percent in Johannesburg. Burberry Group Plc (BRBY) rallied 4.6 percent to a four-month high as the U.K.’s biggest luxury-goods company reported revenue that beat estimates.

Gasoline, oil and sugar led the S&P GSCI Index of 24 commodities down 0.5 percent after the gauge yesterday reached the highest level since October. Oil in New York decreased 0.9 percent to $93.28 a barrel after settling yesterday at the highest price since September.

Platinum Gains

Platinum for immediate delivery rose as much as 2.7 percent to $1,701 an ounce in London, the highest price since Oct. 9. Anglo American Platinum said it will idle four shafts in South Africa, cutting output by 400,000 ounces a year after a review of its operations. Auto catalysts used to reduce harmful exhausts are the biggest use for platinum.

The MSCI Emerging Markets Index lost 0.7 percent as stronger currencies in Asia weighed on exporters and Apple suppliers slid for a second day on concern demand for iPhones is waning. Brazil’s Bovespa retreated 0.6 percent and Russia’s Micex Index rose 0.1 percent

South Korea’s Kospi index slid 1.2 percent as Samsung Electronics Co. declined 2.6 percent. Hon Hai Precision Industry Co. and Catcher Technology Co. dragged Taiwan’s Taiex down 0.8 percent. The Shanghai Composite Index advanced 0.6 percent after Citigroup Inc. said earnings have bottomed out.

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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