The Standard & Poor’s 500 Index rose for a fifth day, led by energy shares, as natural gas rebounded from a 10-year low and investors weighed Europe’s efforts to tame its debt crisis. The euro approached its strongest level of 2012 and Treasuries fell.
The S&P 500 climbed 0.1 percent to close at 1,316.0 at 4 p.m. in New York, while the Dow Jones Industrial Average slipped 11.66 points to 12,708.82 after earlier topping the highest closing level since May. Natural gas jumped 7.8 percent as Chesapeake Energy Corp. planned to cut production following a slump in prices. Oil snapped a three-day slump. The euro added 0.8 percent to $1.3032. Greek bonds rose and Italy’s 10-year yield reached a six-week low. Ten-year U.S. Treasury note yields increased four basis points to 2.06 percent.
Germany and France said talks between Greece and bondholders were making progress, while a government official in Berlin said Germany may be open to combining Europe’s two bailout mechanisms and boosting their funding limit. Finance ministers meeting in Brussels today agreed on all aspects of the European Stability Mechanism in a deal to be signed on Jan. 30, Martti Salmi, an aide at Finland’s Finance Ministry in Helsinki, said by telephone.
“It’s been a brisk run in risk assets this year,” Stephen Wood, who helps oversee $137.6 billion as the New York-based chief market strategist for Russell Investments, said in a telephone interview. “The question is: would the degree of market movement be consistent with fundamentals? On the U.S. side, you have an improving economy. That is competing with the other side of the Atlantic, which is a source of volatility and uncertainty.”
The S&P 500 retreated from its strongest levels of the session today after touching 1,322.28, near a trend-line drawn from the index’s all-time high in 2007 and its peak last year in April, as well as a “downtrend” connecting its May and July highs, according to Ari Wald, a New York-based technical strategist at Brown Brothers Harriman & Co.
The index’s 14-day relative strength index, which measures the degree that gains and losses outpace each other, has stayed above 65 since Jan. 17, matching the longest streak since February, according to Bloomberg data. Some technical analysts consider RSI readings above 70 a sign that stocks have climbed too far, too fast.
“Overextended conditions leave the index vulnerable to short-term consolidation,” Wald said in a note today.
The S&P 500 has climbed 4.6 percent in 2012, the best start to a year since 1997, after companies from Goldman Sachs Group Inc. to Union Pacific Corp. and EBay Inc. topped analysts’ profit projections. The index is up 19.7 percent from its 2011 low on Oct. 3.
Earnings topped estimates at about 65 percent of the 52 companies in the S&P 500 that released results since Jan. 9, data compiled by Bloomberg show. Per-share profit has declined 9.5 percent for the group, while sales are up 0.7 percent.
Procter & Gamble Co., Travelers Cos. and Verizon Communications Inc. lost at least 1.4 percent to lead the Dow’s decline today. P&G’s drop came after the world’s largest consumer-products company was lowered to “hold” from “buy” at Stifel Nicolaus & Co.
Chesapeake Energy, the second-largest U.S. natural-gas producer, rallied 6.3 percent after saying it will cut output, idle drilling rigs and reduce spending in gas fields by 70 percent after prices for the fuel hit a 10-year low. Natural gas for February delivery rose or 7.8 percent to $2.525 per million British thermal units in New York.
‘Terrified’ Two Ways
Barton Biggs, who increased bets on U.S. equities before the S&P 500 rallied last month, said he remains bullish even amid concerns over progress in solving Europe’s debt crisis.
“I’m terrified I’m not long enough if we’re going to have a strong rally here, which we could,” he said during an interview on Bloomberg Television’s “In the Loop” with Betty Liu today. Biggs said his net-long position in equities is 65 percent. At the same time, “I’m terrified I’m too long if the apocalypse is coming in Europe,” he said.
Minefinders Corp., operator of the Dolores gold and silver mine in Mexico, rallied 23 percent after Pan American Silver Corp. agreed to acquire the company for about C$1.5 billion.
Two shares gained for each that fell in the Stoxx Europe 600 Index, which rose 0.5 percent to an almost six-month high.
UniCredit SpA and Commerzbank AG both jumped at least 10 percent after a report that a broad agreement on Greece’s debt has been reached. Outokumpu Oyj surged 18 percent as Finland’s biggest stainless-steel maker held discussions that may lead to a merger with a unit of ThyssenKrupp AG. Cable & Wireless Worldwide Plc rallied 34 percent.
Bondholders negotiating a debt swap with Greece have made their “maximum” offer, leaving it to the European Union and IMF to decide whether to accept the deal, the negotiator for private creditors said.
Charles Dallara, managing director of the Washington-based Institute of International Finance, said he’s hopeful the EU and IMF will agree to terms for private investor involvement in a rescue of Greece to avert a default and collapse of the economy.
Greece will pursue talks on a debt swap with private creditors after euro-area countries lent their support to the effort, the Finance Ministry said in an e-mailed statement. Finance chiefs were discussing the rescue funds, Greece’s latest offer to bondholders, a German-inspired deficit-control treaty and nominees to the European Central Bank’s board in meetings today in Brussels.
IMF Managing Director Christine Lagarde said that efforts to secure additional IMF resources of $500 billion are “on the optimist side.” Lagarde made her comments during a panel discussion in Berlin today.
The yield on the 10-year Greek bond dropped 59 basis points to 33.57 percent. The German 10-year bund yield rose four basis points to 1.97 percent as the government sold 2.54 billion euros ($3.29 billion) of 12-month bills.
Spain’s 10-year bond yield slipped three basis points to 5.46 percent, halting a three-day increase, and Italy’s slid 14 basis points to 6.11 percent, the lowest since Dec. 7.
Germany may be open to boosting the combined limit of its rescue funds from 500 billion euros ($651 billion) when a permanent fund runs alongside the temporary fund starting in July, government officials in Berlin said.
Oil rose 1.3 percent to $99.58 a barrel, snapping a three-day drop, after the EU agreed to ban crude imports from Iran, raising concern over supplies in the Middle East. The S&P GSCI gauge of 24 commodities increased 1.1 percent.
The MSCI Emerging Markets Index rose 0.5 percent, advancing for a fifth day, the longest run of gains in seven weeks. Markets including China, South Korea and Taiwan were shut today for the Lunar New Year holiday.