Oil reached a two-year high amid growing concern there will be an American-led military strike against Syria, while U.S. stocks rebounded following the worst two-day slump since June. Treasuries snapped a four-day advance and European shares declined.
West Texas Intermediate oil added 1 percent to $110.10 a barrel after climbing as much as 3 percent to $112.24. The Standard & Poor’s 500 Index gained 0.3 percent to 1,634.96 as Exxon Mobil Corp. and Chevron Corp. climbed more than 2 percent. The dollar strengthened against 11 of its 16 major peers while the pound climbed from a three-week low versus the euro. Ten-year Treasury yields rose six basis points to 2.77 percent as a sale of five-year debt drew the least demand in four years.
The U.S. and its allies are moving closer to a military strike against Syria in response to an alleged chemical weapons attack near Damascus last week. President Barack Obama plans to release an intelligence assessment this week and U.K. Prime Minister David Cameron said Britain will put forward a draft resolution at the United Nations today authorizing action to protect civilians.
“This market is reflecting anxiety about the Middle East,” said Adam Wise, who helps manage a $6 billion oil and gas bond portfolio as a managing director at Manulife Asset Management in Boston. “As long as tension escalates in the region, specifically in Syria and Iran, you can expect prices to move higher. More news-driven price spikes are on the table.”
U.S. stocks declined and crude rallied yesterday amid speculation that a strike against Syria may spread to other parts of the Middle East and threaten exports from a region that produces 35 percent of the world’s oil. Saudi Arabia, the largest supplier in the Organization of Petroleum Exporting Countries, has backed rebels opposed to Syrian President Bashar al-Assad. Assad’s allies include Iran, the group’s sixth-biggest producer.
“The fear here is that a strike on Syria will lead to a broader regional conflict,” Stephen Schork, president of the Schork Group Inc., an energy advisory company in Villanova, Pennsylvania, said in a report today.
WTI crude for October delivery touched the highest price since May 2011 and Brent oil climbed 2 percent to $116.61, the highest close since Feb. 19. Brent may rise to as high as $150 a barrel if Middle East conflict disrupts supply, according to Societe Generale SA.
The S&P GSCI gauge of raw materials jumped 0.7 percent to the highest since Feb. 20. Cocoa, gasoline, coffee and Brent oil led gains among 11 of the 24 commodities in the index. Copper fell 0.3 percent to $7,290 a metric ton.
The S&P 500 dropped the most in two months yesterday, extending its two-day decline to 2 percent and closing at the lowest level since July 3. Among stocks moving today, energy shares rose 1.8 percent as a group to lead gains among the 10 main S&P 500 industries. TiVo Inc. climbed 5.6 percent after the maker of digital-video recorders posted a profit. Joy Global Inc. lost 4.7 percent as the mining equipment maker said orders for new equipment are declining.
“We’re simply just seeing a little bit of bounce back from what was very bad action yesterday,” Walter Todd, who oversees about $950 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said by phone. “There are probably starting to be opportunities that are being created in certain segments of the market as a result of this sell-off, and investors are wisely looking to see if they can take advantage of some of those.”
The S&P 500 closed below its average for the past 100 days of 1,638.3 today after slipping below the technical level yesterday for the first time since June. The index has lost 4.4 percent from a record high on Aug. 2 amid growing speculation the Federal Reserve will reduce its monthly bond buying. Minutes of the Fed’s July meeting released Aug. 21 showed policy makers supported stimulus cuts this year if the economy improves. Fed stimulus helped push the S&P 500 up as much as 153 percent from its March 2009 low.
An S&P index of 11 homebuilders lost 1.1 percent, extending yesterday’s 2.5 percent decline. Fewer Americans signed contracts in July to buy previously owned homes, a sign that rising mortgage rates are starting to slow momentum in the housing market. The index of pending home sales dropped 1.3 percent, the most this year, figures from the National Association of Realtors showed today. Economists forecast no change in the gauge from the month before, according to a median estimate in a Bloomberg survey.
Oil and American equities are moving in opposite directions by the most in almost two years amid prospects of military intervention in Syria.
While the S&P 500 slid 1.6 percent yesterday, West Texas Intermediate surged 2.9 percent on the New York Mercantile Exchange. The 4.5 percentage-point divergence was the widest since November 2011, data compiled by Bloomberg show.
The commodity’s advance amid the biggest retreat in U.S. shares since June shows attention is shifting to armed conflict and away from the world economy. Oil and the S&P 500 have been positively correlated since April 2011 as the global financial crisis receded. The link is breaking down on concern a U.S. attack may escalate and disrupt supplies from the region that holds almost half of all proven oil reserves.
The dollar strengthened 0.7 percent against the yen and 0.4 percent versus the euro. The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major peers, rose 0.4 percent. The pound climbed 0.3 percent to 1.1639 euros as Bank of England Governor Mark Carney said guidance on interest rates will help the economy as growth prospects are “solid not stellar.”
The U.S. five-year note yield climbed from the lowest level in more than a week, increasing six basis points to 1.58 percent.
The notes sold today drew a yield of 1.624 percent, compared with a forecast of 1.618 percent in a Bloomberg News survey of eight of the Federal Reserve’s 21 primary dealers.
The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.38, the lowest since July 2009 and compared with an average of 2.74 for the past 10 sales. Benchmark 10-year yields climbed from the lowest level in almost two weeks earlier before a government report tomorrow forecast to show the economy grew more last quarter than previously estimated, fueling speculation the Fed may start to curtail monetary stimulus. Economists project 2.2 percent growth in gross domestic product in the second quarter, according to a Bloomberg survey, following the government’s earlier estimate of 1.7 percent.
About three shares fell for every one that gained in the Stoxx Europe 600 Index, as the gauge retreated 0.4 percent for a third straight loss. The volume of shares changing hands in Stoxx 600 companies was 18 percent greater than the 30-day average, according to data compiled by Bloomberg.
Accor SA fell the most in more than 14 months after posting first-half profit that missed analysts’ estimates. Air France-KLM Group and Deutsche Lufthansa AG paced a decline among European travel and leisure companies. Bouygues SA jumped the most in six months after reporting a 10 percent increase in second-quarter profit.
The MSCI Emerging Markets Index slipped 0.6 percent, extending its two-day decline to 2.4 percent and reaching the lowest level since July 8 on a closing basis. Global funds have withdrawn about $44 billion from emerging-market stock and bond funds since the end of May through last week, according to EPFR Global, a Cambridge, Massachusetts-based data provider.
Dubai’s benchmark stock index, which has risen 55 percent for the biggest gain among the 40 largest equity markets in 2013 even as violence in the region spread, slipped 1.3 percent today to extend yesterday’s 7 percent plunge. Israel’s benchmark TA-25 Index rose 0.7 percent, erasing earlier losses after dipping to the lowest level since September 2012.
Turkey’s lira dropped as much as 1.7 percent to 2.0730 per dollar, before paring declines and trading 0.3 percent lower. The rupee slumped to as low as 68.8450 versus the dollar.