Crude oil and gold advanced amid concern America is moving closer to striking Syria, while U.S. stocks rose and Treasuries retreated for a second day as a report showed faster-than-forecast growth in manufacturing.
West Texas Intermediate oil climbed 0.8 percent to $108.54 a barrel and gold futures gained 1.1 percent to $1,412 an ounce. The Standard & Poor’s 500 Index rose 0.4 percent to 1,639.77 after jumping more than 1.1 percent in the first half hour of trading. Ten-year Treasury yields added eight basis points to 2.86 percent. Benchmark equity gauges in Turkey, Dubai, Kuwait and Abu Dhabi sank at least 1.7 percent. The Bloomberg U.S. Dollar Index touched a seven-week high.
U.S. stocks trimmed an early advance and oil extended gains as House Speaker John Boehner backed President Barack Obama’s call for action against Syria. Earlier gains in stocks followed a report that showed faster-than-forecast growth in manufacturing, while Microsoft Corp.’s purchase of Nokia Oyj’s handset unit and Verizon Communications Inc.’s $130 billion acquisition of the rest of its wireless business also fueled speculation that deals will boost stocks.
“The market has been resilient,” Jason Cooper, a money manager who helps oversee $2.5 billion in South Bend, Indiana, at 1st Source Investment Advisors, said in a phone interview. “There is still some opinion that if there is anything negative or anywhere that you can pull some negative vibe from, then the bears are going to react. Any negative news or conflict in Syria, that’d just give them some fuel to say ‘hey, maybe things aren’t that great and we need to really buckle down.’”
West Texas Intermediate crude oil climbed to as much as $108.83 a barrel in New York, approaching a two-year high of $110.10 set on Aug. 28. Early gains were triggered after Israel carried out a joint missile test launch with the U.S. in the Mediterranean Sea. Brent crude, the European benchmark, added 1.2 percent to $115.68.
“The market is processing what appears to be a slow grind to military action against Syria,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund that focuses on energy. “There’s headline risk ahead of us. The reaction to the Israeli missile test is an example of what we will be seeing until the Syria situation is resolved.”
Silver, soybeans and natural gas jumped more than 2 percent to lead gains in 14 of 24 commodities in the S&P GSCI Index, sending the gauge up 0.5 percent. Corn and wheat lost more than 1 percent for the biggest declines.
The S&P 500 rebounded after a 3.1 percent decline in August, the worst monthly drop since May 2012. The ISM manufacturing index climbed to 55.7 in August from the prior month’s reading of 55.4 and topped the median estimate of 54 in a survey of economists. Fifty is the dividing line between growth and contraction.
Gauges of financial, consumer-discretionary and commodity companies climbed more than 0.5 percent to help lead gains among 10 industries in the S&P 500 today. Telephone and utility stocks fell the most as rising Treasury yields competed with their dividends. Telephone and utility companies in the S&P 500 pay more than 4 percent of their prices in divdiends, the highest among the 10 main groups.
CBS Corp. jumped 4.7 percent after the broadcaster’s programs returned to Time Warner Cable Inc. Microsoft slipped 4.6 percent after agreeing to buy Nokia Oyj’s mobile-phone business and license its patents for 5.44 billion euros ($7.2 billion). Verizon Communications Inc. dropped 2.9 percent after agreeing to buy Vodafone Group Plc’s 45 percent stake in Verizon Wireless for $130 billion.
U.S. stocks pared gains earlier as Boehner, an Ohio Republican, said that use of chemical weapons requires a response and only the U.S. has the capability to “warn others around the world that this type of behavior is not going to be tolerated.” Secretary of State John Kerry said that while Obama is not asking the country to go to war, it’s “definitely in our national interests” to respond to Syria.
Obama announced on Aug. 31 that he’d seek support from Congress for a military strike in Syria. The decision came after the president said previously that he had authority to order a military mission in response to what his administration and the French and U.K. governments say was the Syrian regime’s Aug. 21 chemical weapons attack on civilians. The president won conditional support yesterday from Republican Senators John McCain and Lindsey Graham.
Investors in August pulled money from exchange-traded funds at the fastest rate since January 2010, with withdrawals reaching $17.7 billion, according to data compiled by Bloomberg from about 1,500 funds. The SPDR S&P 500 ETF Trust, the largest ETF for American equities, experienced $14 billion in outflows, the data show.
Stocks fell in August amid concern the Fed will reduce its monthly bond purchases and the U.S. will take military action against Syria. Better-than-estimated corporate earnings and monetary stimulus from the Fed have driven the S&P 500 up as much as 153 percent from a 12-year low in 2009, with the gauge closing at a record 1,709.67 on Aug. 2. It has retreated more than 4 percent since.
The Fed will hold a policy meeting on Sept. 17-18 to decide whether to slow the pace of its bond-buying program. Chairman Ben S. Bernanke has said that the central bank may reduce its monthly purchases if the employment outlook substantially improves and the economy grows in line with forecasts.
Global stocks rose yesterday as data showed China’s manufacturing index increased to a 16-month high in August, while other gauges showed euro-area factory output expanded at a faster pace than initially estimated in August. U.S. markets were closed for the Labor Day holiday.
Options strategists from JPMorgan Chase & Co. to Weeden & Co. are predicting that U.S. equity volatility will extend its increase in September after posting its biggest monthly advance in more than a year.
JPMorgan said in an Aug. 29 note that volatility is likely to increase in September and October, and recommended buying puts on global stocks gauges including the S&P 500. Weeden told investors to implement a bearish strategy using October contracts on a security tracking the Russell 2000 Index. The Chicago Board Options Exchange Volatility Index has fallen every September in years when volatility was below its historical average at the start of the month, data since 1996 compiled by Bloomberg show. The VIX rose 1 percent to 17.18 today.
The Stoxx Europe 600 Index closed 0.4 percent lower after gaining 1.9 percent yesterday. Nokia climbed 34 percent after Microsoft agreed to buy the company’s handset business and license its patents for 5.44 billion euros ($7.2 billion).
Turkey’s Borsa Istanbul National 100 Index slid 2.3 percent and the lira sank 1.7 percent versus the dollar. Dubai’s benchmark gauge lost 3.7 percent, while indexes in Abu Dhabi and Kuwait fell at least 1.7 percent.
India’s rupee and stocks plunged the most in Asia on renewed concern about a credit-rating downgrade and as oil surged. Government bonds fell. S&P reiterated today it sees more than a one-in-three chance that India’s debt rating will be cut within two years.
India’s S&P BSE Sensex slumped 3.4 percent and the rupee weakened 2.6 percent versus the dollar. Elevated oil prices raise costs for Asia’s third-largest economy, which imports almost 80 percent of its energy requirements.