Stocks, Metals Gain on China Trade Data as Dollar Falls
U.S. stocks halted a three-day slide while metals and the currencies of Australia, South Africa and Brazil rallied as data on China’s trade and American jobless claims bolstered optimism in the global economy.
The S&P 500 rose 0.4 percent to 1,697.48 as of 4 p.m. in New York, paring gains after briefly topping 1,700, while Brazil’s Ibovespa (IBOV) jumped 3.1 percent for its biggest gain since March. Treasury 10-year yields fell one basis point to 2.59 percent. Copper and zinc added more than 2.5 percent as gold futures jumped 1.9 percent to $1,309.90 an ounce. The U.S. dollar fell versus 14 of 16 major peers, with the rand, Aussie and Brazilian real strengthening more than 1 percent.
China’s exports jumped 5.1 percent in July from a year earlier, more than double the pace forecast in a survey of economists. Investors dissected the latest economic reports to gauge prospects for Federal Reserve stimulus. The number of workers applying for U.S. jobless benefits over the past month declined to the lowest level since before the last recession, after Fed Bank of Cleveland President Sandra Pianalto said yesterday a reduction of bond purchases may be warranted if the labor market continues to improve.
“We’re making baby steps toward a full economic recovery,” Jim King, president and chief investment officer who helps oversee about $2.7 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co., said by phone. “The market often wants things to happen today. In absence of that, we seem to be trapped in this fairly narrow trading range. In order to really bust through higher levels, the market is looking for even more positive news than we’ve seen come out.”
The S&P 500 has rallied 19 percent this year and closed at a record 1,709.67 on Aug. 2. The gauge topped 1,700 for the first time on Aug. 1, after climbing within two points of that level for three times in the previous week only to retreat by the close of trading. It briefly rose above 1,700 today before paring gains and closing below.
Stocks also advanced this year as corporate earnings surpassed estimates. Earnings beat estimates at 72 percent of the 444 companies in the S&P 500 that have reported quarterly results so far this period, while 56 percent have beaten sales projections, data compiled by Bloomberg show.
The Chicago Board Options Exchange Volatility Index (VIX), or VIX, fell 1.9 percent today to 12.73 today. The equity volatility gauge reached its 2013 peak in June and has since dropped 39 percent.
Gauges of commodity, consumer, energy and industrial shares climbed at least 0.4 percent to lead gains among nine of the 10 main industry groups in the S&P 500 today, with only telephone stocks dropping.
Cliffs Natural Resources Inc. and Newmont Mining Corp. gained at least 8.7 percent as metals rallied. Tesla Motors Inc. (TSLA) surged 14 percent after reporting second-quarter results that surpassed analysts’ estimates. JPMorgan Chase & Co. dropped 0.9 percent after saying it’s under federal criminal investigation for practices tied to sales of mortgage-backed bonds.
Microsoft Corp. (MSFT) rose 2.6 percent for the biggest gain in the Dow Jones Industrial Average. The maker of the Windows operating system was raised to overweight from equalweight by Evercore Partners, which said the company has an attractive valuation and may increase its dividend in September. Microsoft trades for about 11.8 times estimated earnings and is forecast to increase its quarterly dividend to 26 cents a share in September from 23 cents, according to Bloomberg projections.
Initial claims for U.S. unemployment benefits rose to 333,000 last week from a revised 328,000 in the previous period, Labor Department data showed. The number of claims in the four weeks ended Aug. 3 declined to 335,500 on average, the least since November 2007, the report showed.
Improvement in the job market has helped fuel speculation the Fed will reduce bond purchases, triggering swings in stocks and bonds. The S&P 500 slumped as much as 5.8 percent from May 21 to June 24 after Fed Chairman Ben S. Bernanke said the central bank could start tapering stimulus if the labor market continues to improve. The benchmark index has rebounded 8 percent since. Ten-year Treasury yields jumped from their 2013 low of 1.63 percent on May 2 to as high as 2.74 percent on July 5.
Fed Bank of Dallas President Richard Fisher told Germany’s Handelsblatt newspaper in an interview today that the central banks should start reducing bond purchases in September if “economic data doesn’t significantly deteriorate.” Fisher, one of the most vocal critics of quantitative easing, said on Aug. 5 the Fed is closer to slowing its stimulus.
The Stoxx Europe 600 Index rose 0.4 percent as results at Deutsche Telekom AG and Commerzbank AG beat estimates. The regional benchmark index snapped a two-day decline, with trading volumes 3.7 percent above the 30-day average. Deutsche Telekom, Germany’s largest phone company, climbed 7.7 percent after second-quarter sales beat estimates.
Commerzbank, the German bank forced into a state bailout, surged 16 percent after reporting net income that exceeded projections. Nestle SA, the world’s biggest food company, slid 2.2 percent after reporting the slowest first-half revenue growth in four years.
The MSCI Emerging Markets Index rebounded from a four-week low, rising 0.9 percent. The gauge of developing nations’ equities has lost more than 10 percent this year, trailing the S&P 500’s performance by almost 30 percentage points. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong added 0.4 percent. China’s imports gained 10.9 percent, more than the median estimate in a Bloomberg survey of 1 percent growth and leaving a trade surplus of $17.8 billion.
The yen was 0.4 percent lower against the dollar, erasing earlier gains of more than 0.5 percent triggered after the Bank of Japan refrained from boosting stimulus measures that tend to weaken a currency. Japan’s currency was at 96.58 per dollar after appreciating to 95.81, the strongest since June.
The Bloomberg Dollar Index fell 0.4 percent as it declined for a fifth day, the longest streak of losses since April. The euro gained 0.4 percent to $1.3386.
The gain in Treasuries pushed 30-year bond yields down one basis point to 3.67 percent as a $16 billion auction of the securities drew above-average demand from an investor class that includes foreign central banks. U.S. benchmark 10-year notes advanced for a second day as the third and final coupon security sale this week found demand with auction yields at almost the highest level in two years.
Copper climbed as much as 3 percent to $7,215 a metric ton in London, the highest level since June, before paring gains and trading at $7,185.
Live cattle rose 1.9 percent after Tyson Foods Inc., the top U.S. meat processor, said it plans to stop buying animals fed with a supplement made by Merck & Co. after discovering lame livestock at factories.
Corn added 0.3 percent to $4.5975 a bushel, halting a five-day slump. U.S. farmers are poised to reap their biggest-ever corn crop, expanding global stockpiles to the most in 13 years and spurring hedge funds and other speculators to make record bets that prices will keep dropping.
The harvest in the largest grower will jump 30 percent to 14.036 billion bushels (356.5 million metric tons), the average of 27 analyst estimates compiled by Bloomberg shows. That’s 53 million bushels more than they expected a month ago and 86 million above the government’s July forecast. Record crops from the U.S. to Brazil to Ukraine will expand world inventories by 23 percent to 152.36 million tons in a year, according to the average of 12 predictions.
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