Stocks Advance to Cap Week of Record Swings; Treasuries Climb

U.S. stocks rose, capping a week of record swings for the Standard & Poor’s 500 Index, as an increase in retail sales tempered concern the economy is slowing. European shares extended a rebound from a two-year low after some nations banned short-sales. Treasuries gained.

The S&P 500, which fell or rose at least 4.4 percent in the previous four sessions, climbed 0.5 percent to 1,178.81 at 4 p.m. in New York to trim its weekly drop to 1.7 percent. The Stoxx Europe 600 Index jumped 3.7 percent as banks climbed for a second day, surging 4.5 percent as a group after sinking 6.7 percent on Aug. 10. The yield on the 10-year Treasury note fell nine basis points to 2.24 percent. The Swiss franc slid against all 16 major peers as the nation considers pegging it to the euro.

About $6.8 trillion was wiped off the value of global equity markets from July 26 through yesterday after S&P downgraded U.S. debt for the first time, riots swept across Britain and Europe’s debt crisis deepened. Government data today showed retail sales climbed in July by the most in four months, further easing concern about the economy following an unexpected drop in jobless claims yesterday. France, Spain, Italy and Belgium banned short-selling, or bearish bets placed with borrowed stock.

“You’ve got a couple of positive data points over the past week, including retail sales,” Stephen Wood, who helps oversee $163 billion as the New York-based chief market strategist for Russell Investments, said in a telephone interview. “Any information about the health of the consumer is important,” he said. “The short-selling ban in Europe may be providing some temporary relief to the market today. But it’s mostly another attempt to buy time to address larger structural issues.”

Record Swings

The swings in U.S. equities this week were unprecedented in the history of the American stock market, according to data compiled by Birinyi Associates Inc., Bloomberg and Howard Silverblatt, senior index analyst at S&P.

The S&P 500 plunged 6.7 percent on Aug. 8, its biggest slump since December 2008, in the first trading session after the U.S. was stripped of its AAA credit rating at S&P. The index rebounded 4.7 percent the next day as the Federal Reserve said it will leave its benchmark interest rate at a record low through at least the middle of 2013. The gauge then fell 4.4 percent on Aug. 10 and rebounded 4.6 percent yesterday. Never before has the index reversed moves that large each day over four sessions, the data show.

Two-Day Rally

The S&P 500 rallied 5.2 percent over the past two sessions for its biggest back-to-back gain since March 2009. The index is down about 14 percent from a three-year high at the end of April.

A gauge of retailers in the S&P 500 climbed 1.5 percent, as 26 of its 30 stocks advanced. Caterpillar Inc. added 2.9 percent, pacing gains among companies most-tied to the economy. Hewlett-Packard Co. advanced 4.1 percent after Jefferies Group Inc. raised its recommendation for the shares.

The 0.5 percent increase in retail sales reported by the Commerce Department matched the median forecast of 81 economists surveyed by Bloomberg News and followed a 0.3 percent increase in June that was larger than previously estimated. Excluding auto sales, purchases rose more than projected.

The S&P 500 briefly erased gains today after confidence among U.S. consumers plunged in August to the lowest level since May 1980, adding to concern that weak employment gains and volatility in the stock market will prompt households to retrench. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment slumped to 54.9 from 63.7 the prior month. The gauge was projected to decline to 62, according to the median forecast in a Bloomberg News survey.

Default Swaps

The cost to protect the debt of U.S. companies fell from the highest level in more than a year. The Markit CDX North America Investment Grade Index of credit-default swaps, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, declined 1.2 basis points to a mid-price of 115.38 basis points as 4:33 p.m. in New York, according to index administrator Markit Group Ltd.

All but 18 of the companies in the Stoxx Europe 600 gained. Societe Generale SA rallied 5.7 percent, paring its loss for the week to 11 percent. France’s stock market regulator opened an investigation into speculation that affected trading in shares of Societe Generale SA, said the agency’s president, Jean-Pierre Jouyet. Societe Generale, France’s second-largest bank, on Aug. 10 denied “all market rumors” and asked regulators to open a probe after speculation that France’s creditworthiness was in doubt sent the shares tumbling 15 percent that day.

Response to Plunge

European regulators are divided over how to respond after a rout that sent the region’s bank stocks to their lowest in almost 2 1/2 years this week. While France, Spain, Italy and Belgium banned short-selling to calm markets reeling from the debt crisis, Germany and the Netherlands have said they don’t plan further restrictions on short sales. British regulators said they don’t plan to limit the practice.

Two- and 10-year Treasury note yields set record lows this week, with the 10-year yield plunging the most since 2008, as investors purchased Treasuries on signs of a widening debt crisis in Europe and the Fed’s plan to leave the benchmark rate unchanged until at least mid-2013.

The 30-year Treasury bond’s yield decreased five basis points to 3.72 percent following a surge of 25 points yesterday after demand dropped at a $16 billion auction of the securities. The sale of 30-year debt yesterday, the first since S&P cut the U.S. credit rating on Aug. 5, drew the lowest level of demand since February 2009.

Franc Weakens

The Swiss franc extended losses versus the euro after a record drop yesterday following the central bank’s plan to consider pegging the currency to the euro. The Tages-Anzeiger newspaper reported that the Swiss National Bank probably wouldn’t face criticism from Switzerland’s main parties if it communicated a target for the franc exchange rate.

The franc depreciated 1.9 percent against the euro, after plunging more than 5 percent yesterday, and weakened 1.9 percent versus the dollar.

Italian 10-year bonds rose for the sixth day, the longest run of gains since August 2010, with the yield falling three basis points to 5.02 percent. The yield has tumbled more than a full percentage point during the streak as the European Central Bank bought the securities this week, according to people with knowledge of the transactions. The central bank declined to comment.

Irish two-year note yields sank 98 basis points to 9.72 percent, down from 13.55 percent a week ago. Spanish two-year yields decreased three basis points.

Crude oil for September delivery slipped 0.4 percent to $85.38 a barrel on the New York Mercantile Exchange, after earlier dropping by 2 percent. Gold futures slipped 0.5 percent to $1,742.60 an ounce.

The MSCI Emerging Markets Index was little changed, capping a weekly drop of 4.9 percent. Developing-nation equity mutual funds had $7.7 billion of withdrawals in the week ended Aug. 10, the third-biggest outflows on record, Citigroup Inc. said.

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