S&P 500 Climbs to Four-Month High While Commodities Rally

Chinese Premier Wen Jiabao
China's Premier Wen Jiabao. Photographer: Petar Kujundzic/AFP/Getty Images

Stocks jumped, sending the Standard & Poor’s 500 Index to the highest level in four months, as Cisco Systems Inc.’s sales topped estimates, U.S. building permits surged and speculation grew that Spain will get a bailout. Commodities rallied and the euro strengthened.

The S&P 500 rose 0.7 percent to 1,415.51 at 4 p.m. in New York, its highest closing level since April 2. Wheat jumped 1.8 percent and oil topped $95 a barrel for the first time in three months to lead the S&P GSCI Index of commodities to the highest level since May. The euro added 0.6 percent to $1.2357, halting a two-day slump. Spain’s bonds climbed and the IBEX-35 stock index surged 4.1 percent on bets a bailout will pave the way for policy makers to buy the nation’s debt.

Cisco surged 9.6 percent to lead technology shares to the best gain among 10 groups in the S&P 500. An index of builders surged to a four-year high as permits, a proxy for future construction, rose to an 812,000 pace, the most since August 2008, the Commerce Department said. A person familiar with the matter said Spain is about to get an emergency disbursement from a 100 billion-euro ($123 billion) package, while German Chancellor Angela Merkel pledged to hold the euro area together.

Today’s U.S. data are “confirmatory that things are really improving,” Greg Peterson, director of investment research at Ballentine Partners LLC in Waltham, Massachusetts, which has about $4 billion in assets, said in a phone interview. “American corporations are in great shape,” he said, and “everybody is seeing an emerging good story coming out of Europe.”

Homebuilders Rally

The S&P 500 Total Return index, which assumes dividends are reinvested back into the gauge’s 500 stocks, climbed to a record today even as the regular S&P 500 remained almost 10 percent below its peak in 2007.

The S&P 500 is up almost 13 percent this year and approaching the four-year high of 1,419.04 reached on April 2. An S&P gauge of 11 homebuilders surged 4.4 percent today and has rallied 60 percent in 2012 on optimism the industry is rebounding. While building permits increased, housing starts fell. Another report showed initial jobless claims rose by 2,000 to 366,000 last week.

Cisco, Home Depot Inc. and Microsoft Corp. led gains in 23 of 30 stocks in the Dow Jones Industrial Average, sending the gauge up 85.33 points to 13,250.11, its highest close since May 2.

Cisco surged the most in a year after job cuts kept costs in check and price reductions attracted customers. Sears Holdings Corp. climbed 6.5 percent after its loss narrowed. Facebook Inc. dropped 6.3 percent to $19.87, the lowest closing price since its initial public offering in May, as 271.1 million of its shares were allowed to trade following the end of a post-IPO lockup. Wal-Mart Stores Inc. fell 3.1 percent after posting second-quarter sales that trailed analysts’ estimates.

Fisher’s Stance

The S&P 500 index had hovered around 1,400 for the previous seven trading sessions as investors awaited the Fed’s summit in Jackson Hole, Wyoming, at the end of the month. Intraday price movements in the index averaged 0.6 percent, the smallest fluctuations over a comparable period since January 2011, according to data compiled by Bloomberg. Daily swings in the Dow Jones Industrial Average averaged 0.7 percent from Aug. 6 through yesterday, the narrowest since March, the data show.

Federal Reserve Bank of Dallas President Richard Fisher repeated his view yesterday that the economy probably won’t lapse into a recession in 2013 and that new stimulus won’t spur growth. Fisher in 2011 dissented twice against moves to push down long-term rates and to keep the benchmark U.S. interest rate near zero until at least mid-2013. He voted five times in 2008 in favor of tighter policy. This year he isn’t a voting member of the Federal Open Market Committee.

European Markets

More than two stocks rose for each that declined in the Stoxx 600. Novozymes A/S jumped 4.8 percent after reporting second-quarter net income that exceeded analysts’ estimates. Telekom Austria NV tumbled 5.6 percent after the phone company that is partly owned by Carlos Slim’s America Movil SAB cut its profit and sales forecast for 2012.

The yield on Spain’s 10-year bonds fell for a fourth day, losing 12 basis points to 6.52 percent. The rate on benchmark German bunds dropped four basis points to 1.53 percent, while the yield on similar-maturity Italian bonds rose two basis points to 5.79 percent. Ten-year U.S. Treasury rates added two basis points to 1.83 percent, the highest since May.

Germany’s Merkel said the European Central Bank’s insistence on conditionality in return for help to lower borrowing costs in indebted countries matches Germany’s priorities to end the crisis in the euro region.

“The ECB is completely in line with what we’ve said all along,” Merkel told reporters in Ottawa today at a joint press conference with Canadian Prime Minister Stephen Harper.

‘Everything We Can’

Merkel said that time is running out to resolve the crisis that emerged in Greece in late 2009 even as European leaders make progress in overcome the turmoil. All the same, policy makers in the 17-nation euro region “feel committed to do everything we can in order maintain the common currency.”

Spain will apply for aid at a meeting of finance ministers and central bank governors next month, allowing the ECB to buy Spanish government debt in the secondary market once approval is won, according to a Medley Global Advisors report Bloomberg News obtained. Medley officials weren’t immediately available to comment.

The euro strengthened against all 16 major peers.

“It’s all very soothing stuff that’s going on, and it’s likely to bolster support for the euro,” Thomas Molloy, chief dealer at FX Solutions LLC, an online currency-trading company in Saddle River, New Jersey, said in a telephone interview. The “Medley report, while it didn’t say anything new, it just reminded everybody that in their view the Spaniards will eventually ask for a bailout, and with a bailout will likely come some ECB buying, which is likely to smack bond yields.”

Pound Strengthens

The pound appreciated 0.4 percent against the dollar after British retail sales including auto fuel gained 0.3 percent in July, compared with a 0.1 percent decline predicted by the media estimate of 22 economists in a Bloomberg survey.

The S&P GSCI gauge of 24 commodities rose 0.8 percent. Wheat gained for a second day on speculation that demand will increase for U.S. and European grains as dry weather reduces supplies in Russia. Farmers in Russia, the world’s third biggest wheat exporter last season, have harvested 27.9 million metric tons of the grain so far this year, 17 percent less than in 2011, as yields declined, the country’s Agriculture Ministry said today.

Crude oil rallied 1.3 percent to $95.60 a barrel in New York. Coffee was down the most among commodities tracked by the index, losing 1.9 percent, and cocoa declined 1.5 percent.

The MSCI Emerging Markets Index added 0.3 percent after dropping as much as 0.3 percent. The Shanghai Composite Index slid 0.4 percent after the smallest inflow of foreign direct investment since July 2010. India’s Sensex lost 0.4 percent, while Russia’s Micex Index added 0.3 percent.

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