Stocks rose, completing the Standard & Poor’s 500 Index’s recovery from the plunge that followed Lehman Brothers Holdings Inc.’s collapse in 2008, and commodities gained as U.S. retail sales and earnings forecasts fueled optimism in the world’s largest economy.
The S&P 500 gained 0.6 percent to 1,254.60 at 4 p.m. in New York, above its closing level on Sept. 12, 2008, the last session before Lehman filed a record bankruptcy and intensified the financial crisis. Copper, cotton and rubber rose to records. The cost to insure Portuguese bonds against default climbed and the euro erased gains after Moody’s Investors Service said the nation’s bond rating may be cut.
The S&P 500 climbed for a fourth day as earnings forecasts topped estimates at Adobe Systems Inc. and Jabil Circuit Inc. and an industry report showed retail sales had their biggest jump of the holiday season last week. European stocks climbed as Chinese Vice Premier Wang Qishan said China “has taken steps to help some EU members counter the sovereign-debt crisis.” China holds $2.65 trillion in foreign-exchange reserves.
“Lehman is the poster child for the demise of the banking industry,” said Michael Mullaney, who helps manage $9.5 billion at Fiduciary Trust Co. in Boston. “We’ve recovered from that. We’re comfortable with equities. If we do get a continuation of the strength in the economy and corporate earnings, we could get a reasonably good year for stocks in 2011.”
Stocks also climbed today as tensions on the Korean peninsula appeared to cool. North Korea indicated a willingness to avoid further confrontation with South Korea and resume talks on its nuclear program, New Mexico Governor Bill Richardson said today after an unofficial visit to the Communist country.
The advance in U.S. equities was led by banks and commodity producers, with JPMorgan Chase & Co. and Freeport-McMoRan Copper & Gold Inc. rising at least 1.9 percent to pace gains. Adobe Systems climbed 6 percent as the biggest maker of graphic-design programs forecast profit that beat analysts’ estimates. Jabil, an electronics manufacturer and designer, rallied 11 percent.
Financial shares rose after Toronto-Dominion Bank agreed to buy Chrysler Financial Corp. from Cerberus Capital Management LP for $6.3 billion in cash, adding an auto-finance company in its second-largest purchase. Retailers climbed as the International Council of Shopping Centers and Goldman Sachs Group Inc. said same-store sales last week grew 4.2 percent from 2009.
Today’s advance came before government data tomorrow that is forecast to show U.S. gross domestic product expanded at a 2.8 percent annual pace in the third quarter, quicker than the 2.5 percent estimate published last month, according to a Bloomberg News survey of economists.
“There’s increased confidence in what the future looks like, at least in the U.S.,” said James Dunigan, chief investment officer at PNC Wealth Management in Philadelphia, which oversees $105 billion. “Corporate earnings and forecasts are strong and the economic picture has improved. In the event we don’t have any bad surprises from Europe, stocks will be the investment of choice.”
The economic expansion starting in June 2009 has driven an 85 percent surge in the S&P 500 since it sank to a 12-year low of 676.53 on March 9, 2009, restoring about $7 trillion of equity value.
U.S. government and Federal Reserve spending to stimulate the economy, coupled with improving profits, drove the rally in equities. The index will end 2011 at 1,374, according to the average projection of 11 strategists at Wall Street’s biggest banks, producing the biggest three-year rally since 1997-2000.
More than four companies gained for each that fell in the Stoxx Europe 600 Index, which climbed to its pre-Lehman level yesterday. Mining companies led the advance, as Rio Tinto Group jumped 2.6 percent and BHP Billiton Ltd. rallied 2.9 percent in London. Royal DSM NV rose 3.9 percent after agreeing to buy U.S.-based Martek Biosciences Corp. for $1.09 billion.
The MSCI Asia Pacific Index jumped 1 percent, while the Shanghai Composite Index rallied for the first time in five days, rising 1.8 percent after a survey showed property sales increased in most Chinese cities during the past week.
The S&P GSCI index of 24 commodities climbed 0.6 percent to the highest level since September 2008. Cotton futures jumped 3.2 percent to close at a record $1.5912 a pound on demand in China, the world’s largest buyer of the fiber. Copper climbed as much as 2 percent to $4.2895 a pound in New York, the highest price for a most-active contract since at least December 1988, and touched a record $9,392 a metric ton in London.
The euro weakened against 13 of 16 major counterparts, losing 0.3 percent to a three-week low of $1.3095.
Moody’s said it may cut Portugal’s bond grade by one or two levels, citing the economy’s “sluggish” growth outlook.
The yield on the Portuguese 10-year bond increased five basis points to 6.75 percent, while the extra yield investors demand to hold the securities instead of benchmark German bunds rose for a third consecutive day, increasing five basis points to 3.54 percentage points. Credit-default swaps on Portuguese government debt rose 10.5 basis points to 486.5, the highest level since Dec. 1, according to data provider CMA.
Ireland’s 10-year bond yield surged for a fourth day, climbing 27 basis points to 9.12 percent for its second-highest level of the month.
U.S. Treasuries fell, pushing the yield on the benchmark 10-year note yield up from near a one-week low, as the Fed concluded its purchase of $7.79 billion of government notes.
Yields have risen about 1 percentage point from their 2010 low on speculation the U.S. extension of tax cuts will spur economic growth and widen the budget deficit. The 10-year yield was at 3.36 percent, up two basis points.