U.S. stocks gained, with benchmark indexes closing at five-year highs, while Treasuries trimmed an earlier advance as the House voted to temporarily suspend the federal debt limit. Oil led commodities lower.
The Standard & Poor’s 500 Index added 0.2 percent to close at 1,494.81 at 4 p.m. in New York, while futures on the gauge followed Apple Inc. lower after the maker of the iPhone reported sales and a revenue forecast that trailed analysts’ estimates. Ten-year Treasury yields decreased 1.4 basis points to 1.83 percent after losing three points earlier. Japan’s currency rose less than 0.1 percent to 88.69 per dollar, its first three-day gain since November.
The S&P 500 reversed an early drop as the House voted 285-144 to lift the nation’s debt ceiling through mid-May as a Bloomberg poll showed global investors say the state of the American government’s finances is the greatest risk to the world economy. The International Monetary Fund cut its global growth forecasts and now projects a second year of contraction in the euro region as progress in battling Europe’s debt crisis fails to produce economic recovery.
“The recent theme seems to be early weakness overcome by afternoon buying,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview. His firm oversees $250 billion. “Earnings continue to be in focus while the House votes on extending the debt ceiling.”
Thirty-year bonds held two days of gains, with the yield down less than one basis point at 3.02 percent, as the Federal Reserve purchased $1.474 billion in longer-term debt. Inflation expectations dropped from the highest in almost three months as the U.S. prepares to sell $15 billion in 10-year inflation- indexed debt tomorrow.
The House voted to suspend the government’s $16.4 trillion borrowing limit until May 19, when the measure would allow the U.S.’s borrowing authority to automatically be increased to accommodate the amount the Treasury borrowed during those three months. Republicans plan to use two other approaching deadlines, the March 1 start of automatic spending cuts and the need to pass a bill to fund the government by the end of March, to extract spending reductions.
In the stock market, a rally in International Business Machines Corp. drove the Dow Jones Industrial Average to its best level since October 2007. Technology shares rose 1.2 percent as a group for the biggest gain in the S&P 500 among the 10 main industries.
IBM surged 4.4 percent, the most in a year, after the world’s biggest computer-services provider forecast profit that exceeded analyst estimates. The gain in IBM, which accounts for almost 12 percent of the price-weighted Dow, added more than 66 points to the gauge. The average closed up 66.96 points, or 0.5 percent, to 13,779.17 even as 17 of its 30 stocks retreated.
Google Inc. (GOOG) rose 5.5 percent, the most in more than a year, after the profit topped analysts’ estimates as advertisers boosted spending to reach consumers during the holidays.
Apple Inc. climbed 1.8 percent in the regular session, before retreating 4.1 percent to $493.04 in extended trading. Apple reported first-quarter sales below analysts’ predictions, adding fuel to investor pessimism that has sent shares down 27 percent since September. Futures on the S&P 500, of which Apple is the biggest company, lost 0.2 percent.
Profit (AAPL) was little changed at $13.1 billion, or $13.81 a share, in the period that ended Dec. 29. Sales rose 18 percent to $54.5 billion. Analysts had predicted profit of $13.53 a share on revenue of $54.9 billion, the average of estimates compiled by Bloomberg. For the fiscal second quarter, which is now under way, Apple forecast sales of $41 billion to $43 billion. That compares with predictions by analysts for revenue of $45.5 billion. The company didn’t provide a profit forecast.
The S&P 500 has climbed 4.8 percent so far in January, poised for its best start to a year since 1997.
Per-share earnings have exceeded analysts’ projections at about 76 percent of the 101 companies in the S&P 500 that released results so far in the earnings season, data compiled by Bloomberg show. Profits at companies in the index are forecast to exceed $1 trillion this year, according to more than 11,000 analyst estimates compiled by Bloomberg. Earnings have grown 20 percent for the group amid a 4.5 percent increase in sales. More than 30 companies in the S&P 500 are reporting today.
Among European stocks, TUI AG and TUI Travel Plc (TT/) fell more than 4.8 percent as the former retreated from a plan to combine with the latter, a week after the two travel companies said they were in preliminary merger talks.
Novartis AG (NOVN), Europe’s biggest drugmaker, climbed 4.1 percent after reporting earnings that beat projections and saying Chairman Daniel Vasella will step down. Unilever gained 2.4 percent as the world’s second-largest consumer-goods maker reported faster-than-estimated revenue growth.
Portugal’s 10-year bonds gained for a fifth day, extending the longest rally since November, before the country sold notes for the first time since requesting a bailout in April 2011. The bond’s rate slid seven basis points to 5.82 percent, the lowest level in more than two years.
Sugar, lead and zinc climbed at least 1.5 percent to lead gains in 17 of 24 commodities in the S&P GSCI Index, while a decline in oil left the gauge down 0.3 percent. Crude futures oil lost 1.5 percent to $95.23 a barrel as capacity on the Seaway pipeline was reduced and the IMF cut its global growth forecasts.
The world economy will expand 3.5 percent this year, less than the 3.6 percent forecast in October, the Washington-based IMF said today in an update of its World Economic Outlook report. While the fund projects growth this year increasing from last year’s 3.2 percent pace, it expects the 17-country euro area to shrink 0.2 percent in 2013, instead of growing 0.2 percent as forecast in October.
“Is Europe on the mend? I think the answer is yes and no,” IMF Chief Economist Olivier Blanchard said in a video released with the report. “Something has to happen to start growth.”
The yen strengthened against 10 of 16 major counterparts, gaining 0.1 percent per euro. Europe’s shared currency was little changed at $1.3317 and the Dollar Index, a gauge of the greenback against six major peers, was little changed at 79.92.
The yen will weaken against the U.S. currency by the end of the year, as the BOJ’s decision to hold off on fresh stimulus puts pressure on the government to revive growth through fiscal measures, according to a Bloomberg survey of strategists.
“The yen currently is in an upward correction phase after it weakened rapidly in the past two months,” said Noriaki Murao, managing director of the marketing group at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The market was somewhat disappointed in that no deadline has been set for the inflation target and that the open-ended asset purchases don’t start until 2014.”
Japan’s top currency official, Takehiko Nakao, said the central bank isn’t engaged in a competitive devaluation of the yen, pushing back against international criticism of the nation’s monetary policy.
“The BOJ’s monetary policy, decided yesterday, is aimed at ending persistent deflation, so criticism that it’s a form of competitive devaluation is misplaced,” Nakao, the Vice Finance Minister, said in an interview in Tokyo today.
The MSCI Emerging Markets Index (MXEF) fell 0.2 percent. South Korea’s Kospi Index slipped 0.8 percent as Goldman Sachs Group Inc. cut its economic growth forecast. India’s Sensex index gained 0.2 percent, Russia’s Micex Index closed up 0.8 percent. The Shanghai Composite Index added 0.3 percent before a manufacturing report tomorrow.
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