By Stephen Kirkland and Michael P. Regan
Oct. 17 (Bloomberg) -- The Standard & Poor’s 500 Index rose to a record and Treasuries rallied as the U.S. raised the debt ceiling and reopened the government. International Business Machines Corp. and Goldman Sachs Group Inc. led the Dow Jones Industrial Average lower, while the dollar weakened.
The S&P 500 increased 0.7 percent to 1,733.15 at 4 p.m. in New York while the Dow declined 2.2 points. The dollar slid 1 percent to $1.3677 per euro, its biggest drop in a month, while Treasury 10-year note yields fell seven basis points to 2.59 percent and gold surged 3.2 percent amid speculation that economic damage from the budget debate will delay reductions in Federal Reserve stimulus. Rates on Treasury bills due on Oct. 24 were at 0.02 percent after extending their two-day drop to almost 45 basis points.
President Barack Obama signed into law a measure ending the 16-day government shutdown and extending the nation’s borrowing authority until early next year. BlackRock Inc. and Pacific Investment Management Co. say the Fed will postpone tapering its bond purchases as a result of the debt-ceiling debate. IBM tumbled 6.4 percent to a two-year low and Goldman Sachs retreated 2.4 percent after each reported declines in sales, with the two stocks taking more than 100 points off the Dow.
“Because of the disruption, because of the uncertainty, what’s likely to happen is a slower pace of tapering,” Russ Koesterich, the chief investment strategist at BlackRock in New York, said in an interview on Bloomberg Television. BlackRock is the world’s largest money manager with $4.1 trillion of assets.
Congress acted the day before U.S. borrowing authority was scheduled to lapse as lawmakers engaged in their fourth round of fiscal brinkmanship in less than three years. Lawmakers didn’t resolve any of their long-term divides on fiscal policy and will have to return to the same issues over the next four months.
Trading of S&P 500 stocks was almost 10 percent above the 30-day average today. The S&P 500 closed yesterday at the highest level since Sept. 19, the day after the Fed surprised markets by announcing it was not ready to begin reducing stimulus, surging 1.4 percent as the Senate crafted the deal.
Gauges of telephone, utility and commodity companies rose more than 1.2 percent to lead gains in nine of the 10 main industry groups in the S&P 500. American Express Co. rallied 5.1 percent, the most in nearly two years, after reporting third-quarter profit that beat analysts’ estimates. Newmont Mining Corp., the second-largest gold miner, jumped 4.6 percent as the price of the precious metal rallied.
IBM tumbled the most since April as the world’s largest technology-consulting company reported its sixth straight quarter of falling sales and its hardware business posted a loss. EBay Inc., the operator of the largest online marketplace, slid 4 percent after its sales and profit forecasts fell short of analysts’ estimates.
Goldman Sachs, the world’s most profitable securities firm before the financial crisis, lost the most in three weeks after reporting earnings that were little changed as the bank cut costs in response to a 20 percent drop in revenue.
IBM and Goldman are the second and third-biggest weightings, respectively, in the price-weighted Dow. Goldman was added to the gauge last month.
The Chicago Board Options Exchange Volatility Index, the benchmark gauge of U.S. options prices known as the VIX, slid 8.4 percent to 13.48. The VIX lost 28 percent in two sessions, the most over similar time spans since January, amid reduced demand for contracts to protect against stock losses.
Some 24 companies in the S&P 500 are due to release results today. Profits for companies in the increased probably increased 1.4 percent during the third quarter as sales rose 2 percent, according to analysts’ estimates compiled by Bloomberg.
The rally in stocks this year has pushed valuations to a three-year high. The S&P 500 trades at 16.7 times reported operating profit, an 18 percent increase from the beginning of 2013, according to data compiled by Bloomberg.
More Americans than forecast filed applications for unemployment benefits last week as California continued to work through a backlog. Jobless claims decreased by 15,000 to 358,000 in the week ended Oct. 12 from a revised 373,000 in the prior period, the Labor Department said. The median forecast of 46 economists in a survey called for a decrease to 335,000. Manufacturing in the Philadelphia region expanded more than projected in October, with the Philadelphia Fed’s general economic index falling to 19.8 compared with the median forecast of economists for a reading of 15.
The stalemate over U.S. fiscal policy “encouraged our enemies” and slowed economic growth, President Obama said today. Speaking at the White House after federal agencies opened for the first time since Oct. 1, Obama said the U.S. suffers because of repeated fiscal brinkmanship.
“It’s emboldened our competitors and it’s depressed our friends who look to us for steady leadership,” he said. The impasse caused “completely unnecessary damage on our economy.”
The dollar fell versus all of its 16 major counterparts, dropping more than 1 percent versus the Swedish krona, British pound and Swiss franc and losing 0.9 percent to 97.90 yen. The Bloomberg U.S. Dollar Index dropped 0.9 percent to the lowest level since Feb. 14.
The government shutdown and debt-ceiling debate prompted Fitch Ratings on Oct. 15 to put the U.S. on watch for a possible credit downgrade. S&P said yesterday the impact of the impasse was worsening by the day and had shaved at least 0.6 percent off of fourth-quarter growth, taking $24 billion out of the economy. The ratings agency forecast 2 percent annualized growth in the fourth quarter, down from the 3 percent seen last month.
Dagong Global Credit Rating Co., one of China’s four biggest credit-rating companies, cut its local and foreign-currency assessments of the U.S. to A- from A. China has the largest foreign holdings of Treasuries, and the latest monthly U.S. government figures showed it increased its total in July.
“Tapering’s pretty much off the table until at least early next year,” said Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group Ltd. in Singapore. “The market’s going to tread cautiously because all the U.S. government’s done is kick the can down the road.”
The pound strengthened the most in four weeks against the dollar, advancing 1.3 percent to $1.6161, after a report showed U.K. retail sales increased more than analysts forecast in September.
About the same number of shares declined as gained in the Stoxx Europe 600 Index, which rose for a sixth straight day and reached the highest level since June 2008. Trading volumes were 10 percent higher than the 30-day average, according to data compiled by Bloomberg.
Sulzer AG, a Swiss pump maker, and Outotec Oyj, a Finnish supplier of smelters to mining companies, sank 4.4 percent and 15 percent respectively after cutting their forecasts. Royal KPN NV tumbled 7.9 percent as America Movil SAB withdrew its $9.7 billion takeover offer for the Dutch phone carrier.
The MSCI Emerging Markets Index advanced for a third day, rising 0.3 percent. Benchmark gauges in Dubai, South Korea and Malaysia helped lead gains in developing nations. Russia’s Micex Index dropped 1.3 percent as oil slid, while India’s Sensex retreated 0.6 percent and the Shanghai Composite Index slipped 0.2 percent. The Hungarian forint, Russian ruble and Czech koruna led currencies higher.
West Texas Intermediate crude oil declined 1.6 percent to $100.67 a barrel, a three-month low, after the American Petroleum Institute said U.S. inventories climbed by 5.9 million barrels last week. Nickel and copper led industrial metals lower, retreating at least 0.4 percent.