U.S. Stocks Gain on Budget Optimism; Oil, Gasoline Fall

U.S. Stocks Gain on Budget Optimism as Oil Falls on Supply Data
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S. Photographer: Scott Eells/Bloomberg

U.S. stocks rose amid optimism lawmakers will reach a budget agreement before the end of the year to avoid automatic spending cuts and tax increases. Treasuries climbed and the Dollar Index halted its longest slump in more than a year. Oil and gasoline slid on supply data.

The Standard & Poor’s 500 Index added 0.2 percent to 1,409.28 at 4 p.m. in New York after earlier slumping as much as 0.6 percent. Ten-year U.S. note yields lost one basis point to 1.59 percent and the Dollar Index increased 0.2 percent after declining for five days. Spain’s bonds extended losses after the government missed a maximum sales target at a debt sale.

A few dozen Republicans joined a bipartisan call to break the impasse between President Barack Obama and House Speaker John Boehner over taxes for the highest-earning Americans, signing a letter calling for exploration of “all options.” Obama told a business group in Washington that “nobody wants to get this done more than me” and lawmakers probably could solve the budget debate in about a week if Republicans move.

“The President had a more positive tone with regard to a resolution of the fiscal cliff today,” said Rick Fier, director of equity trading at Conifer Securities LLC in New York. His firm oversees $8 billion in assets. “People expected the worst when he gets on the TV and he didn’t come across so negatively so the sellers stopped.”

Banks Rally

Citigroup Inc. surged 6.3 percent for its biggest gain in almost a year, and diversified financial firms led gains among 24 industries in the S&P 500, after announcing it will eliminate more than 11,000 jobs and scale back operations in some emerging markets. Bank of America Corp. rallied 5.7 percent. Trading in the two stocks led to a surge in volume, according to Miller Tabak & Co. chief technical analyst Jonathan Krinsky. Volume of S&P 500 stocks was 22 percent higher than the 30-day average, data compiled by Bloomberg shows.

Travelers Cos., the insurer in the Dow Jones Industrial Average, jumped 4.9 percent after saying it is resuming share buybacks and projecting that superstorm Sandy will cost the company about $650 million. Plains Exploration & Production Co. jumped 23 percent and McMoRan Exploration Co. surged 87 percent as Freeport-McMoRan Copper & Gold Inc. agreed to acquire them for about $9 billion.

Apple Inc. slid 6.4 percent, the biggest drop in four years, and led the S&P 500’s earlier decline amid concern Nokia Oyj is getting a leg up in China. Market researcher IDC said the company’s share in the global tablet market will slip to less than half by 2016.

Two-year Treasury yields decreased less than one basis point to 0.24 percent and 30-year rates were little changed at 2.78 percent. Treasury 10-year yields were in a range of 22 basis points last month, according to data compiled by Bloomberg, the narrowest since April 2007. This month, the gap has been 5.6 basis points, or 0.056 percentage point.

European Markets

The Stoxx Europe 600 Index closed up 0.2 percent, after rising as much as 0.4 percent. A gauge of mining companies surged to a four-week high as Anglo American Plc and Rio Tinto Group climbed at least 2.5 percent. Nokia Oyj rallied 9.7 percent as China Mobile Ltd. agreed to carry the Finnish mobile-phone maker’s flagship Lumia 920T smartphone.

Tesco Plc advanced 3.3 percent as the U.K.’s largest grocery company said it will likely leave the U.S. after announcing a review of its Fresh & Easy unit.

Europe’s equity benchmark will rally 11 percent by the end of the first quarter of 2013 if it breaks above a key resistance, according to Natixis. The Stoxx Europe 600 will climb as high as 307 if it crosses above 278, said Ouri Mimran, a technical strategist at Natixis in Paris. The immediate resistance represents the 50 percent Fibonacci retracement of the decline from July 2007 through March 2009 in the aftermath of the financial crisis.

Spanish Yields

Spain’s bonds plunged as the nation sold 4.25 billion euros ($5.56 billion) of bonds, less than the 4.5 billion-euro target. Ten-year Spanish bonds increased 15 basis points to 5.40 percent. Italian 10-year securities dropped for the first time in seven days. German bunds advanced, while French, Belgian and Swiss 10-year rates dropped to record lows as investors sought the safest assets.

Energy commodities led losses in the S&P GSCI Index, with gasoline falling 1.9 percent and crude oil decreasing 0.7 percent to $87.88 a barrel after the U.S. Energy Department said gasoline stockpiles climbed more than forecast.

The MSCI Emerging Markets Index climbed 1.1 percent to the highest level on a closing basis since May. The Shanghai Composite Index increased 2.9 percent, the most since Sept. 7.

China’s regulators abolished a rule limiting insurers’ investments in commercial banks and Xinhua news agency said yesterday after a meeting of top party leaders that China will actively promote urbanization and expand domestic demand. Spain sold 4.25 billion euros ($5.6 billion) of debt due between 2015 and 2022, less than the 4.5 billion-euro target.

Russia’s Micex Index added 1.7 percent and Brazil’s Bovespa index increased 0.2 percent.

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