Stocks Rally With Commodities as Treasuries Retreat

Stocks Rally With Commodities as Treasuries Retreat
A corn field in Princeton, Illinois. Photographer: Daniel Acker/Bloomberg

Stocks rose, sending U.S. and European benchmark indexes to two-month highs, and commodities rallied as American factory orders topped estimates and speculation grew central banks will act to spur growth.

The Standard & Poor’s 500 Index advanced 0.6 percent to close at 1,374.02 while the Stoxx Europe 600 Index added 1 percent, with both above their highest closes since the first week of May. Oil jumped 4.7 percent and corn climbed for a third day as 22 of 24 commodities tracked by the S&P GSCI Index advanced. The yen fell against 15 of its 16 major peers, while 10-year U.S. Treasury notes retreated.

U.S. equities extended gains as government data showed factory orders rose in May for the first time in three months, easing concern that manufacturing is faltering. The European Central Bank is forecast by economists to cut interest rates this week, while a state-owned newspaper in China said the time is ripe for a reduction in banks’ reserve-requirement ratios. Employment figures in the U.S. this week may prompt the Federal Reserve to initiate fresh stimulus, BNP Paribas SA said.

“The factory orders data take the edge off the bad numbers,” John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York, said in a telephone interview. His firm oversees $201 billion. “There’s the notion that the Federal Reserve will do whatever it has to do. The question is - - will the Fed let us slip into a recession? The answer is no.”

Early Close

Trading on U.S. stock markets ended at 1 p.m. today in New York and Treasuries closed at 2 p.m., with exchanges shut tomorrow for the Fourth of July holiday.

Commodity producers, industrial and technology companies rose at least 0.9 percent to lead gains in six of the 10 main industry groups in the S&P 500. Canada’s S&P/TSX Composite Index surged 2.2 percent, its biggest advance since November, as energy and metal producers rallied.

General Motors Co., Ford Motor Co. and Chrysler Group LLC reported U.S. auto sales for June that topped analysts’ estimates, helping the industry surpass projections and stay on pace for the best year since 2007. U.S. auto sales accelerated to a 14.1 million seasonally adjusted annualized rate, researcher Autodata Corp. said in an e-mailed statement.

Alcoa Inc., Caterpillar Inc. and Chevron Corp. rose more than 1.4 percent to help lead gains in the Dow Jones Industrial Average. Ford Motor Co. rallied 2.2 percent as deliveries of cars and light trucks beat estimates.

Treasury Yields

The yield on the 10-year U.S. Treasury note rose four basis points to 1.63 percent. A benchmark gauge of U.S. corporate debt risk was poised to fall to the lowest level in almost two months. The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark, decreased 2.7 basis points to a mid-price of 106.5 basis points.

The Stoxx 600 rallied to the highest level since May 3 as four shares increased for every one that fell. The regional benchmark has climbed 5.2 percent in three days after European leaders agreed on plans to tame the region’s debt crisis. PSA Peugeot Citroen climbed 3.7 percent after a union official said the company plans to cut its French workforce by as much as 10 percent this year.

Barclays Plc slipped 0.8 percent, erasing an early rally of as much as 4.8 percent. Chief Executive Officer Robert Diamond succumbed to political pressure to quit after the bank admitted to rigging global interest rates.

Yen, Aussie

The yen weakened 0.7 percent against the euro and 0.4 percent versus the dollar. Australia’s dollar appreciated 0.8 percent versus the yen after data showed building approvals surged by a record and the central bank left interest rates unchanged.

The S&P GSCI gauge of 24 commodities climbed 3.5 percent to the highest since May. Oil rose to a one-month high of $87.66 a barrel, corn gained 2.9 percent and copper jumped 2.5 percent. Aluminum advanced 3.8 percent after Goldman Sachs Group Inc. said the metal is “attractive at these levels.”

The MSCI Emerging Markets Index advanced 1.7 percent to the highest level on a closing basis since May 11. The Hang Seng China Enterprises Index added 1.4 percent as trading resumed after a yesterday’s holiday. Cutting reserve requirements may become the top choice for the People’s Bank of China to increase liquidity, according to the China Securities Journal, which is published by the official Xinhua News Agency.

Russia’s Micex Index advanced 2.5 percent. Turkey’s ISE National 100 Index jumped 1.2 percent after the inflation rate rose less than analysts estimated.

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