U.S. stocks rebounded following a two-day slump and commodities rose, while the dollar fell, as Federal Reserve Chairman Ben S. Bernanke said the central bank will use monetary tools if necessary to safeguard the economic recovery. Treasuries erased losses.
The Standard & Poor’s 500 Index climbed 1.6 percent to close at 1,237.90 at 4 p.m. in New York. The Stoxx Europe 600 Index ended up 0.9 percent. The Dollar Index slipped 0.2 percent, trimming an earlier drop of 0.7 percent. Treasury 10-year yields were little changed at 1.99 percent after jumping 9 points earlier. The euro gained versus 10 of 16 major peers as European leaders ratcheted up pressure on Greece to accept a bailout. Copper halted a two-day drop and oil rose.
Fed policy makers said the economy strengthened last quarter and refrained from taking additional steps to ease monetary policy, while also repeating that “there are significant downside risks” to the outlook and cutting 2012 growth forecasts. The Fed discussed contingency options during their meeting and Bernanke said purchases of mortgage-backed securities are a “viable option” to help the economy.
“People are focused on two comments -- the economy has firmed and the Fed stands ready to take action,” Mark Bronzo, who helps manage $24 billion at Security Global Investors in Irvington, New York, said in a telephone interview. “The fact that they are not taking action now makes you more comfortable that the economy is doing OK.”
The S&P 500 fell 5.2 percent in the first two days of the week after Greek Prime Minister George Papandreou planned a referendum to allow voters to decide if Greece should accept the European-led bailout, spurring concern the rescue would be rejected and the nation would be forced to default on its debt. European leaders held emergency talks with Papandreou in Cannes, France, on the eve of a Group of 20 summit. The euro-area leaders “won’t accept” a break from last week’s agreement, Luxembourg Prime Minister Jean-Claude Juncker told reporters in Cannes.
Gauges of financial, commodity and energy companies climbed more than 2 percent to lead gains among all 10 of the main industry groups in the S&P 500 today, with Bank of America Corp., Alcoa Inc. and Chevron Corp. rising at least 2.4 percent to pace the advance. The S&P 500 Financials Index advanced 2.8 percent, rebounding from a 4.7 percent plunge yesterday, as 78 of its 81 companies increased.
Forecasts for 2012 growth in U.S. gross domestic product from the five Fed Board members and 12 reserve bank presidents centered around 2.5 percent to 2.9 percent. At a press conference today, Bernanke said “the pace of progress is likely to be frustratingly slow,” with concerns about Europe contributing to “strains” in financial markets. Bernanke said additional purchases of mortgage debt may be considered if the economy warrants it. .
“The housing sector is a very important sector,” Bernanke said today at a press conference in Washington after a two-day meeting of the Federal Open Market Committee. Adding to mortgage-bond holdings is “certainly something we would consider if conditions” are appropriate.
Pulte Group Inc. climbed 4.4 percent to pace gains among nine of 12 stocks in an S&P gauge of homebuilders.
The Stoxx 600 pared this week’s drop to 4.7 percent as basic-resource producers, auto companies and insurers led gains. Randgold Resources Ltd. surged to a record after forecasting a 22 percent increase in gold output next year. Lloyds Banking Group Plc slid 4.4 percent as Chief Executive Officer Antonio Horta-Osorio took leave of absence from his duties following medical advice.
Italy, France Shares Rebound
Benchmark indexes in Italy, France and Germany rose at least 1.4 percent, rebounding from plunges of at least 5 percent yesterday.
The euro strengthened 0.3 percent to $1.3746. The dollar weakened against 10 of 16 major peers, losing at least 0.5 percent versus the Mexican peso, Canadian dollar and South African rand.
German bund yields were six basis points higher at 1.83 percent after dropping 26 basis points yesterday, the biggest decline since Bloomberg began collecting the data in 1992. Greek two-year yields rose as much as 944 basis points to a record 96.72 percent.
Germany sold 4 billion euros of five-year notes at a record-low yield of 1 percent, and Portugal raised 1.2 billion euros in a sale of three-month bills.
Papandreou stuck to plans to hold a referendum on Europe’s rescue package to confirm the nation’s membership of the euro amid signs his government may collapse. The confusion created by the Greek leader threatens to unravel an Oct. 27 crisis-fighting strategy and Europe’s hopes of using the G-20 meeting, which official begins tomorrow, as a way to seek financial assistance.
The cost of insuring European debt fell as investors pared bets that Greece is headed for a disorderly default. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings dropped 21 basis points to 711, according to JPMorgan Chase & Co. at 3 p.m. in London. The gauge yesterday increased by the most ever, signaling deteriorating perceptions of credit quality.
Copper rose 2.2 percent to $3.581 a pound amid speculation that slowing inflation in China will lead to an easing of monetary policy, spurring economic growth and metals demand. The metal also climbed as inventories of the metal in warehouses monitored by the London Metal Exchange dropped for a 10th consecutive day, the longest decline since July 6.
Oil rose 0.4 percent to $92.51 a barrel in New York, the first advance in four days. Futures pared gains as the U.S. Energy Department said stockpiles advanced 1.83 million barrels to 339.5 million last week, topping the median forecast for a 1 million barrel increase in a survey of analysts.
The MSCI Emerging Markets Index rose 0.9 percent, following its worst two-day decline in a month. The Hang Seng China Enterprises Index climbed 2.6 percent in Hong Kong. Russia’s Micex Index advanced 2.2 percent.