U.S. stocks rallied, sending benchmark indexes to the biggest back-to-back gains of the year, while the yen and dollar weakened as signs the Federal Reserve and Bank of Japan will stimulate growth overshadowed an unexpected jump in American jobless claims. Gold climbed.
The Standard & Poor’s 500 Index added 1.4 percent to close at 1,387.57 and rebounded 2.1 percent in two days following a five-day tumble, its longest of 2012. The Dow Jones Industrial Average surged 181 points. The S&P GSCI Index of 24 commodities increased 1.2 percent as nickel and silver jumped at least 2.6 percent and gold climbed 1 percent. Chinese stocks trading in the U.S. surged before the nation reports economic growth figures. The yen slid against all 16 most-traded peers and the dollar fell versus all but the yen. Ten-year U.S. note yields rose two basis points to 2.06 percent.
Federal Reserve Vice Chairman Janet Yellen and New York Fed President William C. Dudley endorsed the view that borrowing costs will stay low through 2014, with Dudley noting it’s “still too soon to conclude that we are out of the woods.” The Bank of Japan will pursue “powerful easing” to overcome deflation, central bank Governor Masaaki Shirakawa said today.
“We’ll continue to see similar language: the Fed is ready to provide more accommodation if necessary,” said Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc. His firm oversees $3.51 trillion as the world’s largest asset manager. “I wouldn’t expect a definitive sign in April that there’s another round of quantitative easing coming. It’s just the idea that the Fed has that in their back pocket.”
The Fed meets in two weeks to debate policy after Labor Department reports showed an unexpected increase in jobless claims to a two-month high of 380,000 last week, and growth in payrolls weakening to the slowest in five months in March.
Hewlett-Packard Co. surged 7.2 percent, the most in three years, to lead gains in the Dow after research firm Gartner Inc. said the global personal-computer industry unexpectedly grew in the first quarter. Caterpillar Inc., Alcoa Inc., Boeing Co. and Bank of America Corp. also rose at least 2.4 percent to help lead the Dow up 1.4 percent to 12,986.58.
Google Inc., the world’s largest Internet search company, advanced 2.4 percent before releasing first-quarter results after exchanges closed. The stock added another 0.4 percent in extended trading as Google reported better-than-estimated adjusted earnings of $10.08 a share after demand for its newer services helped fuel growth. Google also said it will introduce a new class of nonvoting capital stock which will be distributed through a dividend to existing shareholders.
AT&T Inc. rose 1.3 percent as JPMorgan Chase & Co. advised buying the shares. McKesson Corp. jumped 3.9 percent after winning a drug supply contract valued at as much as $31.6 billion over as many as eight years.
The S&P 500 yesterday halted a five-day, 4.3 percent drop after Alcoa reported an unexpected first-quarter profit, bolstering optimism at the start of a reporting season in which per-share earnings growth is projected to have slowed to 0.8 percent, according to analyst estimates compiled by Bloomberg.
The Bloomberg China-U.S. Equity Index of the most-traded Chinese stocks in the U.S. surged 2.5 percent, the most in three months, with Renren Inc. and Tudou Holdings Ltd. leading gains as investors awaited a report at 10 p.m. New York time that’s forecast to show China’s economy expanded 8.4 percent last quarter.
Treasuries pared losses after the U.S. sale of $13 billion in 30-year bonds was met with stronger-than-average demand. The securities drew a yield of 3.230 percent, compared with a forecast of 3.233 percent in a Bloomberg News survey of nine of the Federal Reserve’s 21 primary dealers.
The bid-to-cover ratio, which compares total bids with the amount of securities offered, was 2.76, compared with an average of 2.65 for the past 10 sales. The two-year yield was little changed at 0.29 percent and the rate on 30-year bonds was up 1.7 basis points to 3.21 percent.
Ten-year yields rose for a second day, after dipping below 2 percent for the first time in a month on April 10 as the note’s price climbed for five straight days amid renewed concern over Europe’s debt crisis. The rally in bonds ended yesterday after the European Central Bank’s Benoit Coeure spurred speculation the ECB would buy Spanish debt to suppress the nation’s borrowing costs.
‘A Little Too Aggressive’
“The recent run-up in prices was a little too aggressive and now we are seeing some giveback of the rally in Treasuries, especially with stocks doing better,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners. “We’ve seen some large swings in the market over the last few days which shows that there is a lot of indecisiveness in the market regarding the economy and the need for more easing. No one wants to miss the big trade.”
The S&P GSCI Index of commodities climbed 1.2 percent today, adding to yesterday’s 0.8 percent advance. Copper rallied 2.2 percent to $3.7205 a pound.
Oil added 0.9 percent to $103.64 a barrel in New York. Natural gas futures in New York fluctuated after dipping below $2 per million British thermal units for the first time in a decade yesterday amid concern that a supply glut in the U.S. will worsen amid warm weather.
The Stoxx Europe 600 Index climbed 1.2 percent. Hays Plc rallied 8.9 percent as the U.K. recruitment company forecast full-year operating profit near the top end of analysts’ estimates. Banco Espirito Santo SA plunged 11 percent as Portugal’s biggest publicly traded bank by market value said it plans to sell as much as 1.01 billion euros ($1.3 billion) in stock.
Germany’s DAX Index has rebounded 2.1 percent in two days after slumping 6.4 percent in the previous four sessions as Spanish 10-year yields topped 6 percent for the first time this year, fueling concern Europe’s biggest economy will have to fund another bailout.
Options traders increased bearish bets on the DAX to a more than five-year high versus the rest of Europe, seeking to protect gains after the German equity gauge rallied 17 percent in the first quarter. Puts outnumbered calls by 1.41-to-1 for the DAX yesterday, according to data compiled by Bloomberg. The ratio exceeded the put-to-call measure for the Euro Stoxx 50 Index by 24 percent on March 29, the most since December 2006
Lagarde on Risk
International Monetary Fund Managing Director Christine Lagarde said the main risk to global growth is a return of Europe’s debt crisis, even as data indicate an improvement in economies including the U.S. A recent move by European governments to increase their crisis defenses is only part of the solution, Lagarde said, adding she is hopeful to see progress on her pledge to increase IMF resources when member countries meet in Washington next week.
“Risks may not be as large as estimated earlier this year,” Lagarde said in a speech in Washington today. “But let us make no mistake, the risks and the needs are still sizable and it would be very imprudent to ignore that fact.”
The Italian two-year note yield dropped 18 basis points to 3.25 percent. The Treasury sold the three-year benchmark bonds to yield 3.89 percent, the highest since January and up from 2.76 percent at the previous auction on March 14. The Rome-based Treasury also sold 2 billion euros of bonds due in 2015, 2020 and 2023. The auction’s maximum target was 5 billion euros.
The yen and dollar both lost more than 1 percent versus the New Zealand, Australian and South African currencies. The Aussie rallied against 15 of 16 major peers after a report showed Australian payrolls rose more than economists forecast in March, capping the best quarter since 2010. Payrolls rose by 44,000, a statistics bureau report showed in Sydney, almost seven times the median estimate for a 6,500 increase in a Bloomberg survey.
The MSCI Emerging Markets Index rose 0.9 percent. The Shanghai Composite Index rallied 1.8 percent. The BSE India Sensitive Index, or Sensex, added 0.8 percent amid expectation a slowing factory output will prompt the central bank to reduce lenders’ reserve ratio and interest rates next week. South Korea’s Kospi Index lost 0.4 percent as North Korea prepared to send a satellite into orbit on top of a long-range rocket.
Emerging-market stocks have gained 12 percent this year, beating the 9 percent advance in developed-country shares, and trade for 10.5 times estimated earnings, lower than the 12.4-times ratio for developed-nation equities on the MSCI World Index.