U.S. Stocks Rise With Dollar on Retail Sales; Oil Sinks

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U.S. stocks rebounded from the worst day in seven weeks as an improvement in retail sales helped overshadow a drop in West Texas Intermediate crude below $60. The dollar gained and Treasuries fell.

The Standard & Poor’s 500 Index rose 0.5 percent at 4 p.m. in New York, paring an earlier rally of 1.5 percent. Energy companies in the S&P 500 erased gains after surging 2.5 percent earlier in the day. WTI oil fell 1.7 percent to $59.90, a five-year low, after Saudi Arabia questioned the need to cut output. Greek equities sank 7.4 percent, while European equities erased earlier losses to finish little changed. The yield on 10-year Treasury notes rose one basis point to 2.18 percent. The Bloomberg Dollar Spot Index added 0.6 percent.

Oil’s collapse into a bear market has been exacerbated as Saudi Arabia, Iraq and Kuwait, OPEC’s three largest members, offered the deepest discounts on exports to Asia in at least six years. About $1 trillion was erased from the value of global equities in the previous three days as oil prices tumbled, raising concern over the strength of the global economy. Stocks rebounded early today as U.S. retail sales rose in November by the most in eight months as shoppers benefited from an improving job market and cheaper fuel.

“When you see a big decline like we did yesterday we’re poised for a little bit of a bounce back and retail sales are helping,” Larry Peruzzi, the Boston-based director of international trading at Cabrera Capital Markets LLC, said by phone. “Globally, we’re still one of the bright spots. Retail sales are always an indication that consumers are feeling good.”

Retail Sales

Investors are scrutinizing economic data before the Federal Reserve’s policy meeting next week to help determine the timing of any increase in interest rates.

Retail sales climbed 0.7 percent matching the highest estimate of economists surveyed by Bloomberg. Jobless claims decreased by 3,000 to 294,000 in the week ended Dec. 6. Claims have been below 300,000 for 12 of the past 13 weeks.

Urban Outfitters Inc. led retailers in the benchmark index higher. All 10 of the main groups in the gauge advanced, with utilities and producers of consumer staples adding at least 0.8 percent to pace gains. Staples Inc. rallied 8.7 percent, the most in the gauge.

Energy shares closed higher by less than 0.1 percent. The group yesterday tumbled to the lowest since April 2013. Diamond Offshore Drilling Inc. and Oneok Inc. gained at least 2.2 percent to pace gains. Nabors Industries slid 3.1 percent.

Resilient Market

The S&P 500 will continue to climb on the back of a solid U.S. economy paired with low inflation and a boost to consumers from lower oil prices, according to JPMorgan Chase & Co. The benchmark index will rise to 2,250 in 2015, head strategist Dubravko Lakos-Bujas wrote in a note today. That implies an 11 percent advance from yesterday’s close.

The strategist’s forecast amounts to a prediction that the U.S. market will keep having days like today, in which the S&P 500 is advancing even as concern grows about a default in Venezuela, Russia’s fifth interest-rate increase fails to stem the ruble’s worst rout since 1998 and Greek stocks cap a three-day plunge.

Benchmark U.S. 10-year yields rose after touching almost the lowest level since Oct. 16, when signs of slowing global economic growth led to speculation the central bank might delay monetary tightening.

The dollar snapped a three-day skid amid further evidence of a strengthening economy. The yen weakened 1.3 percent to 119.30 per dollar after surging 3 percent during the previous three days. Japan’s currency depreciated 0.7 percent to 147.72 per euro. The dollar rose 0.5 percent to $1.23824 per euro.

Lay Groundwork

“As long as data continue to show wage gains and broad improvement in the jobs market, they want to begin rate normalization ever so slowly and patiently,” said Quincy Krosby, a market strategist based in Newark, New Jersey, at Prudential Financial Inc., which oversees $1 trillion in assets. Fed Chair Janet Yellen “is going to lay the groundwork” for the first rate increase.

The MSCI Emerging Markets Index fell for a fifth day, dropping 1.4 percent to extend an eight-month low.

Dubai stocks led declines in the Gulf region, with the DFM General Index tumbling 7.4 percent to the lowest level since January. Abu Dhabi’s ADX General Index slid 4.7 percent and Qatar’s benchmark gauge lost 4.3 percent.

Swaps traders are almost certain that Venezuela will default as the rout in oil prices pressures government finances and sends bond prices to a 16-year low. Benchmark notes due 2027 dropped to the lowest since September 1998.

Russia Assets

The ruble fell 2.7 percent to 56.4016 per dollar after Bank of Russia raised its key rate to 10.5 percent, in line with the median estimate in a Bloomberg survey.

The Micex Index of stocks slipped 2.1 percent while the 10-year yield fell 25 basis points to 12.46 percent, extending yesterday’s 26 basis-point drop.

Credit-default swaps on Russia rose for a 14th day, the longest streak on record, climbing to an almost six-year high of 422 basis points, according to data compiled by Bloomberg. Swaps on Russia were the most actively traded in the world last week, according to the Depository Trust & Clearing Corp.

The Stoxx 600 closed little changed after earlier sliding as much as 0.8 percent. The gauge has tumbled 3.3. percent this week. Retailers rose the most among 19 groups today.

Commodity producers declined for a sixth day, the longest losing streak since September. Rio Tinto Group and BHP Billiton Ltd., the world’s biggest miners, each lost 1.8 percent to lead resource producers lower.

The Woodshed

“The sector has been taken to the woodshed on slowing growth in China, deflation in Europe and an overall lack of consumption around the world,” Ion-Marc Valahu, a co-founder and fund manager at Clairinvest in Geneva, wrote in an e-mail. “Like the oil sector, the market is unable to find a bottom so far.”

Italian bonds gained after a second round of targeted loans by the European Central Bank came in at the low end of analysts’ estimates, boosting the case for quantitative easing.

The ECB said it allotted 130 billion euros ($161 billion) to euro-area banks at a fixed interest rate of 0.15 percent in its targeted longer-term refinancing operation.

Germany’s 10-year yield fell to a record-low 0.664 percent before ending at 0.68 percent, while the 30-year yield dropped below 1.5 percent for the first time.

Greek government bonds fell, pushing three-year rates to the highest level since the nation restructured its debt in 2012. The nation’s 10-year yield exceeded 9 percent after Prime Minister Antonis Samaras said the markets fear a victory for anti-bailout party Syriza in potential elections next year.

Greek Equities

The country’s ASE Index has fallen 20 percent this week. The measure slumped the most since 1987 on Dec. 9 amid concern a possible snap parliamentary election would open the door to anti-austerity leadership.

Credit-default swaps insuring $10 million of Greek debt for five years were quoted at $3.2 million upfront and $500,000 annually, according to CMA. That’s up from $2.7 million in advance yesterday and signals a 55 percent probability of default within five years.

Norway’s krone tumbled 1.9 percent per euro. It weakened through 9 per euro for the first time since 2009 after the Norges Bank cut its overnight deposit rate by 0.25 percentage point to 1.25 percent. Only one of the 17 economists surveyed by Bloomberg predicted the move, while the rest saw unchanged rates.

West Texas Intermediate crude settled at $59.95 a barrel and Brent dropped 0.9 percent to $63.68.

Gold and silver declined as the dollar strengthened for the first time this week and investors speculated that low oil prices will restrain inflation. Bullion futures dropped 0.2 percent to $1,226.40 an ounce.

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