U.S. Stocks Rebound as Yen Climbs, Commodities Slide

U.S. stocks rose, erasing earlier losses, as investors watched earnings ahead of central bank meetings next week. The yen climbed after a jump in consumer prices reduced speculation Japan will need to boost stimulus, while commodities slid as China cut manufacturing capacity.

The Standard & Poor’s 500 Index increased 0.1 percent to 1,691.65 at 4 p.m. in New York, after dropping as much as 0.8 percent. The gauge was down less than 0.1 percent for the week, snapping a four-week rally. The Stoxx Europe 600 Index slipped 0.2 percent. Japan’s currency rose 1 percent to 98.27 per dollar, bringing this week’s gain to 2.4 percent. The S&P GSCI (SPGSCI) gauge of 24 raw materials dropped 0.6 percent, with copper down 2.5 percent and West Texas Intermediate oil falling 0.7 percent. Treasuries rose for a second day.

Starbucks Corp. beat earnings forecasts while Expedia Inc. posted sales and profit that missed estimates. Consumer prices in Japan excluding food rose 0.4 percent in June, more than economists estimated, as Prime Minister Shinzo Abe’s policies weaken the yen and energy costs rise. China directed more than 1,400 companies in industries from steelmaking to papermaking to cut excess capacity by year-end.

“Earnings are coming in through efficiencies, lower expenses, and lower interest costs,” said Timothy Hoyle, the director of research at Radnor, Pennsylvania-based Haverford Investments, which oversees about $6 billion of assets. “We still don’t see end market demand in the economy.”

Weekly Decline

The S&P 500 (SPX) is heading for a 5.3 percent advance for the month. The gauge fell in June, after seven successive months of gains, as investors examined economic data for clues on when the Federal Reserve will start to reduce its $85 billion of monthly bond purchases.

Support from central banks and better-than-estimated earnings have driven the S&P 500 up as much as 151 percent from its March 2009 low to record highs. The Fed has said economic data will determine the timing and pace of any reduction in its bond-buying.

The Fed will start trimming its purchases in September, according to a Bloomberg survey of economists. Fed Chairman Ben S. Bernanke said last week it is “way too early to make any judgment” as to whether policy makers will start tapering purchases in September. The Fed’s Open Market Committee next meets to review policy on July 30-31.

Earnings Season

Investors are also watching company earnings reports. Of the 260 companies in the S&P 500 that have posted quarterly results so far, 73 percent have exceeded analysts’ estimates for profit and 57 percent have topped sales projections, data compiled by Bloomberg show.

Starbucks jumped 7.6 percent after reporting profit that beat estimates. Zynga Inc. plunged 14 percent after abandoning plans to enter online gambling and forecasting earnings that fell short of estimates. Expedia tumbled 27 percent after missing second-quarter sales and profit estimates.

Consumer confidence unexpectedly increased in July to the highest level in six years, according to the Thomson Reuters/University of Michigan final index of U.S. consumer sentiment, released today.

Next week offers more clues to the state of the economy. Accompanying earnings reports from companies including Procter & Gamble Co. and Exxon Mobil Corp. will be data on U.S. gross domestic product and the monthly labor report, as well as monetary policy announcements by the Fed and the European Central Bank.

U.S. GDP

U.S. economic growth probably slowed to 1 percent in the second quarter from the 1.8 percent pace in the previous period while employers added 185,000 workers in July, down from 195,000 in June, economists surveyed by Bloomberg forecast. The ECB is likely to leave its benchmark rate at a record low of 0.5 percent, according to the median estimate of economists in a Bloomberg survey.

The Stoxx 600 has climbed 17 percent since ECB President Mario Draghi said at a speech in London a year ago today the policy makers will do whatever is needed to preserve the euro. Spanish 10-year yields have dropped to 4.62 percent from a euro-era record 7.75 percent the day before Draghi’s speech. Italian 10-year rates dropped more than 2 percentage points in the same period, from 6.71 percent.

Tighter Spreads

“We are one year on from ‘whatever it takes,’” Kit Juckes, a global strategist at Societe Generale SA in London, wrote in e-mailed comments. “The euro has held together, no one has left, spreads are tighter, PMI is back up, the sun is shining and even the Spanish unemployment rate has fallen.”

The Stoxx 600 lost 0.3 percent this week after four straight weeks of gains. LVMH Moet Hennessy Louis Vuitton SA (MC), the world’s largest luxury-goods maker, climbed 3.6 percent and Kering SA, owner of the Gucci brand, advanced 3.9 percent after reporting accelerating sales growth. Deutsche Boerse AG slipped 3.7 percent as the operator of the Frankfurt stock exchange reported declining profit.

Treasury 10-year note yields fell 1 basis point to 2.56 percent. U.S. debt ended two weeks of gains after the government sold $99 billion of securities over the previous three days, including seven-year debt at the highest yield since July 2011.

The yen rose against all of its 16 major counterparts, advancing 1.1 percent to 130.43 per euro. Japan’s Topix index tumbled 2.9 percent. The dollar was little changed at $1.3274 per euro, for a decline of 1 percent this week.

Emerging Markets

The MSCI Emerging Markets Index slipped 0.1 percent. The Shanghai Composite retreated 0.5 percent. Samsung Electronics Co. (005930) lost 0.9 percent in Seoul after posting net income of 7.58 trillion won ($6.8 billion) for last quarter, versus an average analyst estimate of 8.02 trillion won.

The S&P GSCI fell for a third day and lost 2.1 percent for the week, its first weekly decline since June 21.

Crude futures slid 0.7 percent to $104.70 a barrel, bringing the decline this week to 3.1 percent. Oil retreated as much as 1.5 percent today on speculation that China’s plans to cut excess manufacturing capacity will reduce fuel consumption. Copper lost 2.5 percent, the most in three weeks, amid concern that demand will slow.

Gold declined for the third time in four days. Futures for December delivery lost 0.6 percent to $1,321.90 an ounce on the Comex in New York. The metal rose 2.2 percent this week.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net

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

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