U.S. stocks rose, reversing early losses, as consumer confidence increased and manufacturing grew at the fastest pace since June 2011, easing concern about the economy as $85 billion of federal spending cuts were set to begin. Commodities fell and the pound and euro slumped.
The Standard & Poor’s 500 Index rose 0.2 percent to close at 1,518.20 after dropping as much as 0.9 percent earlier. The gain left the benchmark gauge up almost 0.2 percent for the week. The S&P GSCI gauge of 24 raw materials slid 0.9 percent to a two-month low as lead, aluminum, copper and oil helped lead losses. The euro dipped below $1.30 for the first time in eight weeks and the pound traded for less than $1.50 for the first time since 2010. Sweden’s currency rallied as economic growth beat estimates.
The better-than-estimated U.S. data helped the market recover following reports that showed China’s manufacturing slowed for a second month while factory output in the euro area contracted for the 19th straight month. The U.S. Senate rejected a pair of partisan proposals to replace the automatic across- the-board spending reductions which the International Monetary Fund says will hurt global growth.
“A couple economic data points are reminding the market that the sequestration is an issue, it’s an issue that was known, but the underlying fundamental data continued to improve slightly,” Andres Garcia-Amaya, New York-based global market strategist at JPMorgan Chase & Co.’s mutual funds unit, which oversees $400 billion in assets, said in a phone interview.
Stocks erased gains in the final minutes of trading yesterday after the Dow Jones Industrial Average climbed to within 16 points of its record set in 2007. The Dow added 35.17 points to 14,089.66 today, its highest closing level since October 2007, the month it set an all-time high of 14,164.53. Bank of America Corp., Wal-Mart Stores Inc., International Business Machines Corp. and Walt Disney Co. climbed at least 1 percent to lead gains in the Dow today.
Groupon Inc. (GRPN) rallied 13 percent as the largest daily-deal website ousted Andrew Mason as chief executive officer. The shares sank 24 percent yesterday after its revenue forecast missed analysts’ estimates. Intuitive Surgical Inc. (ISRG), which plunged 11 percent yesterday after U.S. regulators said they were probing the safety of its robots, rebounded 8.5 percent today. Cantor Fitzgerald LP analyst Jeremy Feffer raised his rating to buy from hold, saying he saw limited risk from the investigation.
Stocks began erasing early losses this morning as the Institute for Supply Management’s factory index advanced to 54.2 last month from 53.1 in January, exceeding the most optimistic forecast in a Bloomberg survey in which the median projection was 52.5. A reading greater than 50 signals expansion. The Reuters/University of Michigan index of consumer sentiment increased to 77.6 in February, topping the median estimate of 76.3.
Government data showed household purchases, which account for about 70 percent of the economy, climbed 0.2 percent after a 0.1 percent gain the prior month. Personal incomes decreased 3.6 percent, more than forecast and the most in 20 years, as payroll taxes increased.
The S&P 500 has returned 24 percent on average in years it’s risen in both January and February, a bullish sign for 2013, according to S&P. The S&P 500 climbed in both January and February 26 times since 1945, Sam Stovall, S&P’s New York-based chief equity strategist, wrote in a note. All 26 years ended with positive returns when including dividends, the data show. The benchmark gauge for U.S. equities returned 5.2 percent in January and 1.4 percent in February of this year including dividends.
“Even though the investing community faces economic and legislative hurdles in the near and long term, equity prices have risen in both January and February signaling, in our view, that many of these worries are unwarranted,” Stovall wrote in the note dated Feb. 25. “Since 1945, bucking the typical groundhog giveback has been a plus.”
The S&P GSCI of commodities fell to the lowest level of the year and capped its fourth weekly decline, the longest streak since June. West Texas Intermediate oil dropped 1.5 percent to $90.68 a barrel. Copper traded in London slipped 1.4 percent to the lowest since November and aluminum retreated for a 10th day, the longest slump since June. China is the biggest buyer of energy and industrial metals.
European coal for 2014 fell as much as 1.1 percent to a record $97.10 a metric ton as Deutsche Bank AG said China’s anti-pollution efforts may turn the country into a net exporter of the fuel in 2015. Shares of coal producers Consol Energy Inc., Peabody Energy Corp., Arch Coal Inc. and Walter Energy Inc. each slumped more than 4 percent.
The dollar led gains in world markets last month, beating global measures of bonds, stocks and commodities, as the threat of U.S. budget cuts proved no barrier to investors snapping up American assets. Japan overtook China last year as the largest foreign holder of U.S. securities, including equities, asset- backed debt and Treasuries, the U.S. Treasury Department said.
The Dollar Index, which tracks the currency against six U.S. trading partners, climbed 0.4 percent today. Treasuries advanced for a second day, with the yield on 10-year notes falling three basis points to 1.84 percent.
The Stoxx Europe 600 Index erased most of an earlier 1.1 percent plunge, leaving the gauge down 0.3 percent today and up 0.2 percent for the week. The index climbed for nine months through February, the longest run of gains since 1997.
Thales SA surged 12 percent as Europe’s biggest maker of defense electronics reported earnings that topped estimates and started a review of regional and product focus to improve profitability. Belgacom SA (BELG), the largest phone company in Belgium, fell 5.6 percent to a record low after forecasting earnings that trailed analyst estimates. Royal Vopak NV, the world’s biggest chemical and oil storage company, tumbled 11 percent as operating profit declined.
The euro slid 0.3 percent to $1.3023 after sliding as low as $1.2967, the weakest since December. The shared currency declined against 12 of 16 major peers.
The pound fell against 15 of its 16 main counterparts and the yield on the 10-year gilt fell 10 basis points to 1.87 percent. A gauge of factory activity sank to 47.9, compared with a revised 50.5 in January and less than the 51 reading in a Bloomberg survey.
The krona climbed to its strongest level against the euro since September after Sweden avoided the contraction most economists predicted in the fourth quarter. The krona appreciated 0.8 percent to 8.3777 per euro.
Japanese bonds surged after a report showed lingering deflation. The 10-year bond yield touched 0.64 percent, the lowest since June 2003. The Bank of Japan (8301) may add monetary stimulus as early as April as prospective governor Haruhiko Kuroda looks to demonstrate a more aggressive approach to tackling 15 years of falling prices. The yen weakened against all 16 major peers.
The MSCI Emerging Markets Index (MXEF) slipped 0.1 percent. The Hang Seng China Enterprises Index of mainland companies fell 0.8 percent and the Shanghai Composite Index slipped 0.3 percent. The official Purchasing Managers’ Index was 50.1 in February, the weakest in five months and less than the 50.5 median estimate in a Bloomberg News survey of 31 analysts. Commodity producers led Russia’s Micex Index down 0.8 percent and Brazil’s Bovespa index lost 0.9 percent.
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