U.S. stocks climbed, with the Standard & Poor’s 500 Index rising to a record, as Federal Reserve Chair Janet Yellen said the central bank may alter its strategy on stimulus cuts should the economy weaken. The yen gained on worsening Ukraine tensions while sugar surged.
The S&P 500 rose 0.5 percent to 1,854.29, an all-time high. The Stoxx Europe 600 Index declined 0.2 percent. Japan’s currency appreciated 0.2 percent to 102.15 per dollar by 4:40 p.m. in New York while Ukraine’s hryvnia fell to a fresh record low. Ten-year U.S. Treasury yields slipped two basis points to 2.64 percent and Italy’s 10-year yield dropped to the lowest level since 2006. Sugar extended its gain from a recent low to 20 percent amid drought in Brazil and hog futures soared.
While Yellen reiterated that the Fed will probably continue to reduce bond buying, she said asset purchases were not on a preset course and a “significant” change in the economic outlook could cause policy makers to alter their strategy. She acknowledged that “adverse weather conditions” may be to blame for weaker economic data. U.S. durable goods orders fell less than estimated in January, data today showed, signaling manufacturing may be recovering after the harsh weather.
“Yellen said that they would consider pulling back on their tapering schedule if the economy slowed in a meaningful manner,” Matt Maley, an equity strategist with Miller Tabak & Co., said in an interview from Boston. “She also said that the data had been weaker since she last spoke to Congress two weeks ago. So it’s a bit of a change. She seems to be more willing to step back on the accelerator than she was when she last spoke to Congress.”
Verizon Communications Inc. and Goldman Sachs Group Inc. rose more than 1.5 percent for the biggest gains in the Dow Jones Industrial Average, which advanced 0.5 percent.
J.C. Penney Co. jumped 25 percent after forecasting an increase in annual revenue and expansion in profitability. About 74 percent of the 477 companies that have posted earnings this season beat analysts’ estimates for profit, data compiled by Bloomberg show.
Durable goods orders decreased 1 percent in January, following a revised 5.3 percent drop in December that was larger than previously estimated, a Commerce Department report today showed. The median estimate in a Bloomberg survey of economists called for a 1.7 percent decline. Separate data showed claims for jobless benefits climbed last week.
The S&P 500 was little changed yesterday, closing fewer than 4 points below its record for a third straight day. The gauge topped its previous closing high of 1,848.38 each day this week, only to retreat from that level by the end of the session. The index came within six points of the record each day last week. It reached an intraday record of 1,858.71 Feb. 24.
The gauge has rallied 6.5 percent from a low reached Feb. 3 as investors speculated that severe winter weather was to blame for weakness in data from housing to hiring. Yellen said today in her testimony on monetary policy before the Senate that the Fed “will likely reduce the pace of asset purchases in further measured steps at future meetings” even as it takes time for the job market to recover.
Ten-year Treasury yields touched the lowest level in almost three weeks as ongoing political turmoil in Ukraine boosted demand for safer investments
Gunmen occupied parliament and the government building in Ukraine’s Crimea region, while lawmakers in Kiev met to approve a new cabinet after the ouster of President Viktor Yanukovych. Russia put fighter jets on alert. The European Union and the U.S. have pledged aid to the former Soviet republic’s new administration while Russia has questioned its legitimacy and halted a $15 billion bailout.
“What you’ve got with the Ukraine is just one of the many countries that make up the whole investors’ latest map of worry,” David Bianco, chief U.S. equity strategist at Deutsche Bank Securities Inc., said in an interview with Michael McKee and Tom Keene on Bloomberg Radio. “The S&P is a global index and we do pay attention to the world economy. Sometimes, I find myself sitting back and thinking, well, the S&P is 16.5, 17 times trailing earnings. Is the world serene enough to support that PE?”
The hryvnia pared losses to 10.7 per dollar after weakening beyond 11 versus the greenback. International Monetary Fund Managing Director Christine Lagarde said in a statement that the IMF is ready to assess the country’s request for aid.
Russia’s ruble slid as much as 0.6 percent against the dollar today, while Brazil’s real advanced 1.3 percent after a report showed the economy grew in the fourth quarter more than economists forecast. The country’s central bank raised benchmark interest rates yesterday by 25 basis points, or 0.25 percentage point, to 10.75 percent.
The yen gained against 10 of its 16 major counterparts. The euro advanced 0.2 percent to $1.3710 as the Bloomberg Dollar Spot Index slipped for the third time in four days, losing 0.2 percent.
The MSCI Emerging Markets Index rallied 0.7 percent as Ukraine’s benchmark gauge added 4.1 percent, advancing after the IMF decision. Brazil’s Ibovespa rallied 2.2 percent after two days of declines.
Investors are stepping up withdrawals from emerging-market exchange-traded funds and shifting into Europe as concern mounts that growth is faltering in developing nations.
Withdrawals from U.S.-based ETFs investing in emerging-market equities and bonds totaled $11.3 billion this year, already surpassing the redemption of $8.8 billion for the whole 2013, according to data compiled by Bloomberg. Funds investing in European assets added $5 billion in the first two months of 2014, compared with $18 billion full-year inflows in 2013.
The S&P GSCI index of 24 commodities retreated 0.4 percent as natural gas futures fell to a five-week low in New York. The heating fuel headed for the biggest weekly drop in 17 years after a government report showed a decline in U.S. stockpiles that was less than analysts predicted.
Copper futures touched the lowest level in more than three weeks in New York amid concern that the economic recovery in the U.S. may falter at a time when growth in China is slowing. The metal for delivery in May slid 0.5 percent to close at $3.201 a pound.
Sugar futures entered a bull market, climbing more than 20 percent from a January low, as dry weather threatens crop yields in Brazil, the world’s top producer and exporter of the commodity. Hogs gained 2.8 percent after earlier jumping the exchange limit as demand increases for the meat as a cheaper alternative to beef.
Trading volume in the Stoxx 600 was in line with the 30-day average, according to data compiled by Bloomberg.
WPP Plc, the world’s largest advertising company, lost 3.5 percent as Allianz SE, Europe’s biggest insurer, slid 2.3 percent. Royal Bank of Scotland Group Plc fell 7.7 percent after posting its biggest full-year loss since receiving a government bailout in 2008.
Man Group Plc jumped 14 percent after the world’s largest publicly traded hedge fund said assets rose 3 percent in the fourth quarter and it will buy back $115 million of stock. Veolia Environnement SA climbed 8.2 percent after the biggest European water and waste company said it aims to increase adjusted operating cash flow by 10 percent and post “significant growth” in profit this year.
Government bonds rose across the euro region amid signs of slowing inflation, which boosts the value of payments on fixed-income assets.
Yields on Italy’s 10-year bond fell eight basis points to 3.46 percent, and rates on Germany’s bunds dropped five basis points to 1.56 percent. Ireland’s 10-year securities advanced for a 10th day, pushing the yield seven basis points lower to 3.08 percent, the least since 2005. Portugal’s two-year note yield declined 19 basis points to 1.70 percent before the nation buys back bonds due in October 2014 and October 2015.