March 19 (Bloomberg) -- U.S. stocks rose as Apple Inc. announced a dividend and buyback plan and banks advanced, while 10-year Treasuries extended the longest slump since 2006 as investors bet the economy will continue to strengthen.
The Standard & Poor’s 500 Index added 0.4 percent to close at an almost four-year high of 1,409.75 at 4 p.m. in New York, extending its best first-quarter rally since 1998, while the S&P 600 SmallCap Index jumped 0.9 percent to a record and the Nasdaq Composite Index closed at an 11-year high. Ten-year Treasury yields rose seven basis points to 2.37 percent in a ninth straight gain. The S&P GSCI commodity gauge climbed 0.3 percent with oil up 1 percent at $108.09 a barrel.
Technology companies led the advance as Apple, the most-valuable company, closed above $600 for the first time after authorizing a $10 billion stock-repurchase plan and a quarterly dividend of $2.65 a share. Financial shares in the S&P 500 rose 0.6 percent as a group as Citigroup Inc., Wells Fargo & Co. and JPMorgan Chase & Co. paced gains in banks.
“It’s all about confidence,” James Paulsen, who helps oversee about $333 billion as chief investment strategist at Minneapolis-based Wells Capital Management, said in a telephone interview. “You’re seeing more evidence of corporate confidence rising to the extent that companies are starting to act on that. You had the Apple announcement on a dividend today and banks announcing dividend hikes last week. The environment for the next few years still looks very good.”
United Parcel Service Inc. increased 3.4 percent after agreeing to buy TNT Express NV to challenge Deutsche Post AG. E*Trade Financial Corp. rallied 1.6 percent as Wells Fargo raised its rating on shares of the online brokerage.
The S&P 500 is up about 108 percent from a 12-year low in March 2009 and has climbed 12 percent so far this year. Daily prices changes in the index are decreasing the most in eight decades, shrinking to the smallest since 1995 when investors abandoned stocks just before the biggest rally ever.
The benchmark gauge for U.S. equities gained or lost an average 0.46 percent a day this year through, compared with 1.04 percent in 2011, the biggest reduction since 1934, during the Great Depression, according to data compiled by Bloomberg through last week. Swings are diminishing after valuations fell 40 percent and correlation among shares weakened the most in at least three decades.
Investors are piling into securities that protect against losses in equities at the fastest rate ever after the S&P 500 climbed to the highest level in almost four years.
Demand to hedge gains pushed up the number of shares available for trading to records last week in four of the five largest exchange-traded funds and notes that track U.S. stock volatility, data compiled by Bloomberg show. For the iPath S&P 500 VIX Short-Term Futures ETN, the biggest of the securities, outstanding stock reached 100.1 million on March 16, up 51 percent since March 9 and more than fourfold since Dec. 30.
Apple’s payout pushed the dividend yield on the S&P 500 to 2.14 percent from 2.06 percent, Howard Silverblatt, S&P’s senior index analyst, said in a telephone interview today. The initiation is the biggest ever for the benchmark gauge of American equities, surpassing Cisco Systems Inc.’s announcement of a $1.3 billion dividend in March 2011. Apple now pays the second-largest dividend in the S&P 500 by dollar amount, behind AT&T Inc.
“It’s probably going to change the demographics, to some extent, of the investor base,” Mike Abramsky, analyst at RBC Capital Markets, said in a Bloomberg Television interview. “It’ll reduce volatility and I think it will probably help the valuation which has been suppressed to some extent because of the lack of productive use of the cash.”
Apple trades at 17 times reported earnings, less than half its average valuation of 38 times earnings in data going back to 1990.
The 10-year Treasury yield reached the highest level since October. Two-year yields increased two basis points to 0.38 percent and 30-year rates climbed seven points to 3.47 percent, also near the highest since October.
The dollar weakened against all 16 major peers except for the yen. Not since 1999 have currency traders been bullish on the dollar for so long, a sign that the market sees the U.S. resuming its role as the engine of global economic growth.
Futures anticipating a stronger dollar against its developed-market peers have outnumbered those predicting a drop for 26 consecutive weeks through the five days ended March 13, according to Commodity Futures Trading Commission data. That’s the longest streak since the start of a three-year rally in the world’s reserve currency 13 years ago.
The Stoxx Europe 600 slipped 0.1 percent from an eight-month high, paring a drop of as much as 0.6 percent. Standard Life Plc and DSV A/S paced declining shares after analysts downgraded the companies. Misys Plc rallied 7.4 percent after Vista Equity Partners agreed to buy the company for 1.3 billion pounds ($2.1 billion). Greek banks climbed as corporate bond risk fell in Europe.
Among European bond markets, Italy’s 10-year yield slipped two basis points to 4.84 percent, Spain’s was little changed at 5.20 percent and Germany’s added less than one basis point to 2.06 percent.
The International Monetary Fund said March 16 that Greece may need another bailout, as credit-default swaps dealers held an auction today to settle as much as $3.2 billion of the nation’s bond insurance. IMF Managing Director Christine Lagarde urged policy makers yesterday to be vigilant about threats to economic stability, citing oil prices, debt and the risk of slowing growth in emerging markets.
The cost of insuring against default on European corporate bonds fell for a fifth day, according to traders of credit-default swaps. The Markit iTraxx Crossover Index of contracts on 50 mostly junk-rated companies dropped 25.5 basis points to 502.75, the lowest level of the year.
Sellers of credit-default swaps on Greece will have to pay as much as $2.5 billion to settle contracts triggered by the nation’s debt restructuring. The settlement was determined after dealers agreed on a final value for Greek bonds of 21.5 percent of face value at an auction, according to administrators Markit Group Ltd. and Creditex Group Inc., and is in line with where the notes have been trading.
The MSCI Emerging Markets Index slipped 0.2 percent in a third straight drop. The Hang Seng China Enterprises Index of Chinese stocks listed in Hong Kong fell 1.6 percent, its fourth consecutive decline, after China’s home prices had the worst performance in at least a year. The BSE India Sensitive Index, or Sensex, dropped 1.1 percent, extending a four-week slump. The Micex Index fell 1.9 percent in Moscow.
New home prices in China weakened in 27 of 70 cities last month from a year earlier and prices were unchanged in six cities, the national statistics bureau said in a statement on its website yesterday. That is the worst since the government began releasing individual data for 70 cities instead of a national average at the start of 2011.
To contact the reporter on this story: Michael P. Regan in New York at firstname.lastname@example.org