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U.S. Stocks Gain With Commodities While Treasuries Drop

Photographer: Scott Eells/Bloomberg

Traders work on the floor of the New York Stock Exchange. Close

Traders work on the floor of the New York Stock Exchange.

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Photographer: Scott Eells/Bloomberg

Traders work on the floor of the New York Stock Exchange.

U.S. stocks rose, with the Standard & Poor’s 500 Index rebounding following its longest losing streak of the year, and commodities advanced after jobless claims unexpectedly decreased. Treasuries fell.

The S&P 500 (SPX) climbed 0.3 percent to 1,698.67 at 4 p.m. New York time following a five-day slump. The index pared a gain of as much as 0.7 percent amid concern lawmakers will fail to reach a budget compromise to avert a government shutdown. Stocks slumped in China and rallied in Japan while Europe’s benchmark index closed little changed. The S&P GSCI gauge of 24 raw materials gained 0.5 percent, with energy and industrial metals leading gains. Ten-year Treasury yields increased two basis points to 2.65 percent after falling for four days.

Initial jobless claims dropped by 5,000 to 305,000 last week. The government’s final estimate of U.S. growth showed that the economy expanded at a 2.5 percent annualized rate, unrevised from the previous report and signaling the nation was weathering federal budget cutbacks and higher taxes. President Barack Obama and congressional Republicans are debating the U.S. federal budget in a confrontation that risks a government shutdown within days.

“Economic news have been reasonably good,” Mark Foster, chief investment officer who oversees $620 million at Kirr Marbach & Co. in Columbus, Indiana, said in a telephone interview. “On the negative side, we have the short-term budget issues and debt ceiling. I don’t think that’ll end up being a major issue. People just get somewhat immune to all of that.”

Photographer: Ralph Orlowski/Bloomberg

A trader monitors financial data on his computer screens at the Frankfurt Stock Exchange in Frankfurt. Close

A trader monitors financial data on his computer screens at the Frankfurt Stock Exchange in Frankfurt.

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Photographer: Ralph Orlowski/Bloomberg

A trader monitors financial data on his computer screens at the Frankfurt Stock Exchange in Frankfurt.

Budget Debate

House Republican leaders offered a proposal today to increase the U.S. debt ceiling that drew protests from some members as a dispute over federal spending risks a government shutdown in four days. Republican leaders are preparing for what House Speaker John Boehner last month called a “whale of a fight” on the debt limit. They think they would win public support for pairing spending cuts with the increase in the debt cap rather than risking a government shutdown over the budget on Oct. 1.

The S&P 500 advanced after closing at the lowest level in more than a week. The index had fallen 1.9 percent over the previous five days after closing at an all-time high on Sept. 18. It’s up 19 percent for the year and 5.8 percent for the third quarter.

Gauges of telephone, consumer and commodity companies rose more than 0.5 percent to lead gains in nine of the 10 of the main industry groups in the S&P 500 (SPA) today. Only utility shares declined.

U.S. Movers

Bed Bath & Beyond Inc. gained 4.5 percent after raising the low end of its earnings forecast. Apple Inc. added 1 percent as Morgan Stanley said iPhone demand is “tracking significantly ahead of expectations.” Eli Lilly & Co. fell 3 percent after its experimental drug ramucirumab failed to meet its goals for treating breast cancer in a late-stage trial. Hertz Global Holdings Inc. sank 16 percent, the most in four years, after cutting its forecasts.

The yield on 10-year Treasury notes has fallen from a two-year closing high of 2.99 percent on Sept. 5 after the Federal Reserve last week said it will continue with its $85 billion in monthly bond purchases, surprising investors who expected the central bank to begin tapering its stimulus.

Fed Watch

Fed Bank of Richmond President Jeffrey Lacker said in Stockholm that the size of the Fed’s balance sheet increases the risks and the costs of policy errors. Fed Bank of Minneapolis President Narayana Kocherlakota, a voter on policy next year, said the Fed must do “whatever it takes” to strengthen a job market that is healing too slowly.

Trading volume for shares in the Stoxx Europe 600 Index was 24 percent greater than the average of the past 30 days. The gauge has surged 9.8 percent this quarter, on course for the biggest gain in four years.

Ladbrokes Plc sank 7.6 percent as the U.K. gambling operator said 2013 operating profit for the digital unit will be below analysts’ estimates. Thomas Cook Group Plc slid 6.6 percent after the U.K. tour operator said winter bookings have started more slowly than last year.

Hennes & Mauritz AB, Europe’s second-biggest clothing retailer, surged 6.7 percent after reporting quarterly profit that topped estimates for the first time this fiscal year. Alcatel-Lucent SA rallied 6.3 percent as people with knowledge of the matter said Nokia Oyj, which is set to become a manufacturer focusing on wireless networks after the sale of its handset business, is evaluating a linkup with the French company. Nokia was little changed in Helsinki trading.

Italy’s 10-year bond yields increased 9.8 basis points to 4.34 percent before the country auctions as much as 6 billion euros ($8.1 billion) of debt tomorrow.

Japan Stimulus

Japanese Prime Minister Shinzo Abe will announce an economic stimulus package on Oct. 1 at the same time as his decision on whether to raise the country’s sales tax, ruling Liberal Democratic Party tax panel chief Takeshi Noda told reporters today. The nation plans to pledge to promptly start a study on cutting the effective corporate tax rate, Kyodo News reported, without citing anyone.

The Topix (TPX) climbed 0.8 percent to 1,220.49 at the close in Tokyo, its highest since July 23.

Japan’s currency weakened 0.5 percent to 98.91 per dollar. It was down 0.2 percent at 133.5 per euro. The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major currencies, gained 0.3 percent.

Emerging Markets

The MSCI Emerging Markets Index fell 0.5 percent, paring its quarterly gain to 6.6 percent.

The Shanghai (SHCOMP) Composite Index slumped 1.9 percent, the most in more than a week, as companies linked to the city’s free-trade zone led declines amid concern recent gains were excessive. Taiwan’s TWSE Index dropped 1.2 percent and Poland’s WIG20 Index jumped 1.2 percent.

Wheat, gasoline, lead and aluminum rose at least 1 percent to lead gains in 17 of the 24 commodities in the S&P GSCI Index.

West Texas Intermediate crude for November delivery rose for the first time in six days, climbing 0.4 percent to $103.03 a barrel on the New York Mercantile Exchange. WTI closed yesterday at the lowest settlement since July 3.

To contact the reporters on this story: Paul Dobson in London at pdobson2@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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