Treasury Yields Jump With Dollar on Jobs as Stocks Gain
Treasury yields jumped to 11-month highs and the dollar strengthened as faster-than-forecast growth in American jobs bolstered optimism in the world’s largest economy. U.S. stocks gained, sending the Standard & Poor’s 500 Index to within 1 percent of its 2007 record.
Ten-year note yields added five basis points to 2.05 percent and touched 2.08 percent, the most since April. The Dollar Index climbed to the strongest level since August as the yen dropped to its weakest since 2009. The Standard & Poor’s 500 Index rose 0.5 percent to 1,551.18. Cocoa, gasoline, corn and natural gas jumped more than 1 percent to lead commodity gains. Orange juice surged the most in 14 months on supply concerns.
Treasury yields and the dollar extended gains as government data showed the U.S. economy created 236,000 jobs in February, while the unemployment rate unexpectedly slipped to to a four- year low of 7.7 percent. Federal Reserve policy makers at their last meeting debated curtailing bond-buying that is seen as debasing the dollar, a move Chairman Ben S. Bernanke has opposed as he seeks to drive down unemployment at 6.5 percent.
“A lot of folks in the market are talking about how long the Fed will continue to keep the incredibly accommodative stance of monetary policy,” Hayley R. Boesky, vice chairman of global markets at Bank of America Corp., said in an interview on Bloomberg Television’s “Market Makers” program with Erik Schatzker and Stephanie Ruhl. “While this number will be encouraging for the Fed, it’s not enough to change anything. We need to see several more months of data like this and also have an outlook that would see substantial improvement.”
Thirty-year bond rates added four basis points to 3.25 percent, climbing for a fifth day and reaching an 11-month high. The gap between yields on two- and 10-year notes widened to as much as 1.82 percentage points, the most since April 2012.
The dollar strengthened against 12 of 16 major peers, surging 1.3 percent to 96.04 yen and adding 0.8 percent to $1.3002 per euro, near its strongest level of the year.
Pacific Investment Management Co.’s Bill Gross, manager of the world’s biggest bond fund, said gross domestic product in the U.S. may expand 3 percent this year, an increase from his firm’s most recent growth estimate of less than 2 percent.
The U.S. is “moving towards a 3 percent real GDP growth rate” this year, and a nominal growth rate of 5 percent, Gross said today in an interview with Tom Keene on “Bloomberg Surveillance”. Pimco said in December that the U.S. would grow between 1.25 percent and 1.75 percent in 2013.
The Dow Jones Industrial Average (INDU) reached a record for a fourth consecutive day, climbing 0.5 percent to 14,397.07. McDonald’s Corp., Walt Disney Co. and Home Depot Inc. climbed more than 1.5 percent to lead the 30-stock gauge’s advance today. Pandora Media Inc. surged 18 percent today after the Internet radio service posted a fourth-quarter loss that was smaller than analysts forecast and said Joe Kennedy has resigned as chairman and chief executive officer after nine years at the helm.
Citigroup Inc. added 3.7 percent as it sought permission to buy back shares. Goldman Sachs Group Inc. lost 2.3 percent for the second-biggest drop in the S&P 500 after lagging behind peers in a measure of capital strength used by regulators.
The S&P 500 may climb to 1,600 this year as more stocks participate in the market rally, Bank of America Corp.’s Mary Ann Bartels said. That would represent a 3.1 percent gain from today’s closing level and surpass its record of 1,565.15 reached in October 2007. The index may drop as much as 10 to 15 percent after it rallied this year without a retreat of more than 3 percent, and investors should take advantage of any pullback to buy equities, Bartels said in a Bloomberg Radio interview with Carol Massar.
Investors should favor U.S. equities over European or emerging-market shares, according to Sharmin Mossavar-Rahmani, chief investment officer for Goldman Sachs Group Inc.’s private wealth-management unit. She said she’s bullish on bank shares because they are cheap even after rallying this year. The S&P 500 Banks Index (S5BANKX) trades for about 11 times reported earnings, compared with 15.3 for the U.S. equity benchmark, according to data compiled by Bloomberg.
“U.S. equities, in the long-run, are the place where clients should have their core assets, relative to Europe or emerging markets,” Mossavar-Rahmani said in an interview with Bloomberg Television.
The Stoxx Europe 600 (SXXP) Index extended its five-day rally to 2.3 percent, its biggest weekly advance in two months. A gauge of lenders contributed the most to the equity benchmark’s advance today as DNB ASA, Norway’s largest bank, jumped 4.5 percent after increasing its lending rates. The Norwegian government has proposed stricter rules for lenders to cool down the housing market. Credit Suisse Group AG (CSGN) added 3.9 percent after UBS AG recommended buying the shares.
Lagardere SCA rallied 4.8 percent after the publisher of Paris Match magazine returned to profit in 2012. Fugro NV surged 14 percent, the biggest advance in the Stoxx Europe 600, after the oilfield surveyor announced net income for 2012 that exceeded analysts’ estimates and a bigger dividend than expected.
Spanish 10-year yields dropped 13 basis points to 4.76 percent, falling for an eight straight day and reaching the lowest level since November 2010, as a report showed industrial production shrank less than economists forecast and added to signs Europe’s economy is stabilizing.
Italian 10-year rates erased earlier declines to trade little changed at 4.6 percent. After European markets closed, Fitch Ratings downgraded Italy by one level to BBB+ with a negative outlook, citing inconclusive election results.
The yen weakened against 15 of its 16 major peers after Japan’s Ministry of Finance said the deficit in the current account, the widest measure of trade, increased to 364.8 billion yen ($3.8 billion) in January, from 264.1 billion yen in December.
The Nikkei 225 Stock Average (NKY) rallied 2.6 percent, closing above the level before Lehman Brothers Holdings Inc. filed for bankruptcy in 2008. Another report showed Japan’s economy grew at an annual rate of 0.2 percent in the fourth quarter, compared with a preliminary calculation of a 0.4 percent contraction. China’s exports in February beat economists’ estimates, while imports plunged.
The MSCI Emerging Markets Index increased 0.8 percent as benchmark gauges in India, the Czech Republic and Turkey jumped more than 1 percent. Brazil’s Bovespa slipped 0.7 percent after jumping 5.2 percent in the previous two sessions, the biggest rally since July.
The S&P GSCI index added 0.3 percent as 13 of 24 commodities advanced. Orange-juice futures jumped the most in 14 months after the U.S. government cut its forecast of the crop in Florida, the world’s second-largest citrus grower. Juice for May delivery rose 6.9 percent to settle at $1.3315 a pound in New York.
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