Stocks rallied, sending one of the broadest measures of global equities to an all-time high, and Treasuries gained as the Federal Reserve said U.S. growth is bouncing back and repeated that rates will remain low for a “considerable time.” Brent crude climbed to a nine-month high.
The MSCI All-Country World Index advanced 0.6 percent to a record 427.70 at 4 p.m. in New York. The Standard & Poor’s 500 Index (SPX) jumped 0.8 percent for a fourth day of gains and a record close, as Fed Chair Janet Yellen said valuations are within historic norms. Ten-year Treasury yields fell six basis points to 2.59 percent. The Bloomberg Dollar Spot Index dropped 0.4 percent from a one-week high. Brent futures settled above $114 as Iraqi forces battled extremists north of Baghdad.
Yellen said accommodative monetary policy, rising home and equity prices and an improving global economy are some factors that should produce above-trend growth in the U.S. The Federal Open Market Committee continued to trim bond-buying that has fueled a rally in equities around the world and helped push the S&P 500 up 189 percent from a bear-market low in 2009. The FOMC repeated today that it’s likely to “reduce the pace of asset purchases in further measured steps” and to keep rates low after the bond-buying ends. A report yesterday showed inflation quickened in May by the most in more than a year.
“There was some expectations that this could be a little more hawkish given that some inflation measures had come up,” Michael Arone, the Boston-based chief investment strategist at State Street Global Advisors’ U.S. Intermediary Business, said by phone. State Street Corp. oversees $2.4 billion. “Now that the Fed has not interpreted that in a way that means the economy is overheating, I think the market will be pleased with that result.”
A pickup in inflation lessens the threat of a prolonged drop in prices that hurts economic growth, giving Fed officials reason to continue to scale back their unprecedented bond-buying program. Steady labor-market gains has also bolstered confidence about the recovery.
“Economic activity is rebounding in the current quarter and will continue to expand at a moderate pace thereafter,” Yellen said at a press conference in Washington today.
Policy makers today predicted their target interest rate will be 1.13 percent at the end of 2015 and 2.5 percent a year later, higher than previously forecast. They lowered their long-run estimated rate, reflecting a slower growth rate for the U.S. economy.
“The markets are definitely relieved to see a fairly dovish comment,” said Youssef Zohny, portfolio manager at Stenner Investment Partners of Richardson GMP Ltd. in Vancouver. Richardson GMP manages about C$28.3 billion ($26 billion). “There wasn’t too much change, and really the no change is what markets are cheering.”
It took the MSCI All-Country World Index about 6 1/2 years to surpass the record it set in October 2007, more than a year longer than the S&P 500 as slower advances in Europe and emerging markets held the broader measure back. More than $46 trillion of stocks are tracked by the MSCI gauge, which fell 60 percent in about 16 months during the 2008 credit crisis.
The Chicago Board Options Exchange Volatility Index (VIX), known as the VIX, lost 12 percent to 10.61 today, the lowest level since 2007. The measure of volatility has dropped 23 percent this year, and is within two points of its record low reached in 1993.
The S&P 500 has climbed 7.5 percent since a low on April 11, as data showed the economy is recovering from the impact of extreme weather earlier this year. The benchmark index is trading at 16.5 times the projected earnings of its members, up from 15.5 times at the beginning of the year.
Canada’s S&P/TSX Composite Index advanced 0.4 percent today for a fifth day of gains to close at an all-time high six years to the day after its last record.
Emerging-market stocks ended five days of declines, with the MSCI Emerging Markets Index adding 0.4 percent. Brazil’s Ibovespa rose the most among the world’s major benchmarks as commodity producers rallied.
The S&P GSCI index of 24 commodities rose 0.2 percent for a fifth day of advances. Wheat futures rose 0.9 percent to $5.956 a bushel, while corn rallied from the lowest level in more than four months as investors assessed the development of the U.S. crop.
Brent rose 0.7 percent to settle at $114.26 a barrel as Islamist militants fought the Iraq government for control of a northern refinery. West Texas Intermediate fell 0.2 percent to $106.12 after a government report showed stockpiles rose last week at Cushing, Oklahoma.
Gold advanced 0.2 percent to $1,273 an ounce in New York as the Fed’s decision boosted demand for the metal as an alternative asset. The metal’s 60-day historical volatility dropped to 11.401, the lowest since Oct. 18, 2010, according to data compiled by Bloomberg. Gold futures traded in a range of $45 an ounce this month, compared with $74 in May.
Platinum for immediate deliver jumped as much as 1.4 percent and traded 0.5 percent higher to $1,446.85 an ounce in London trading. A deal to end a strike by South African miners at the world’s largest platinum producers will be delayed after a labor union made fresh demands, according to two people familiar with the talks.
In Europe, the Stoxx 600 was little changed after gaining 0.3 percent yesterday. Royal Dutch Shell Plc and BG Group Plc rose as a gauge of oil and gas companies increased amid the spreading conflict in Iraq. Daily Mail and General Trust Plc climbed 3.1 percent as its Zoopla Property Group Plc unit rose on its stock-market debut. Boliden AB gained 3.5 percent after Nordea Bank AB upgraded the copper and zinc producer.
Argentina’s restructured debt sank the most in emerging markets to trade at less than 71 cents on the dollar, a three-month low. Officials overseeing South America’s second-largest economy say the nation doesn’t have sufficient reserves to pay what they estimate could be $15 billion of claims from holders of defaulted bonds that didn’t participate in two debt exchanges following the country’s 2001 default.