U.S. stocks climbed and European equities capped the biggest rally since 2011 on Greece’s bailout agreement, while currency traders took the deal as a green light to sell the euro.
The Standard & Poor’s 500 Index rose 1.1 percent at 4 p.m. in New York, capping its best three days this year. The Stoxx Europe 600 Index jumped 2 percent, bringing its four-day surge to 6.3 percent. Bonds in Spain and Italy ended little changed, while German bunds erased an earlier drop to advance. The euro slid on speculation the deal may clear the way for higher U.S. interest rates.
While equities investors speculated the deal reached by euro-area leaders will remove an obstacle to Europe’s economic recovery, bond traders shifted attention to the parliamentary hurdles ahead before the nation can even begin negotiations with creditors. The crisis in Greece and a rout in Chinese equities had prompted traders to speculate the Fed wouldn’t raise rates till next year.
“It’s great hearing Greece is not going over the deep end, at least not this week,” Rob Lutts, chief investment officer at Salem, Massachusetts-based Cabot Wealth Management Inc., said via phone. “Last week’s volatility was all on the back of what’s going on in Greece, as well as in China, and today it’s pretty apparent the path is one of resolution.”
The S&P 500 advanced 2.6 percent in the past three days after falling to the lowest level since March 11. The gauge is 1.5 percent below its last record from May 21. Today’s gain brought the index briefly past its average price for the last 50 days for the first time since June 26 on an intraday basis.
All of the 10 main groups in the index advanced, with technology and consumer-discretionary shares climbing at least 1.4 percent for the biggest advances. An index of 30 retailers climbed to an all-time high, bolstered by Netflix Inc. and Amazon.com Inc., as both reached records.
“It’s a no-brainer right now with this knee-jerk response,” Steve Bombardiere, an equity trader at Conifer Securities LLC in New York, said by phone. “It’s good that a disaster maybe has been averted. We had a fairly decent rebound so it’s more muted here than anywhere else. We’re in earnings season now, we need to see evidence of a recovery.”
JPMorgan Chase & Co., Wells Fargo & Co. and Intel Corp. are among S&P 500 firms slated to report results this week. Analysts project earnings for companies on the equity benchmark dropped 6.4 percent in the second-quarter.
As the Greek crisis nears its conclusion, U.S. equity investors will refocus attention toward economic data for clues on the Fed’s policy. Reports this week include retail sales, industrial production, housing starts and consumer sentiment.
Fed Chair Janet Yellen said Friday she still expects to raise interest rates this year and repeated that the subsequent pace of increases will be gradual. She will deliver her semiannual testimony to Congress on Wednesday and Thursday.
Treasury 10-year note yields rose four basis points to 2.43 percent, after jumping eight basis points on Friday following Yellen’s comments.
The euro tumbled by the most in almost three weeks amid speculation a Greek deal will produce enough calm for the Fed to act. The shared currency dropped 1.4 percent to $1.1009, after a 1.1 percent gain on July 10. It slipped 0.8 percent to 135.80 yen, paring Friday’s 2.3 percent jump.
The euro was also put under pressure as a rally in European stocks created demand for hedges against currency losses. Portugal and Italy led the biggest rebound in European equities since December 2011. Italy’s FTSE MIB Index and Portugal’s PSI 20 Index each rallied more than 10 percent in the past four days, while Germany’s DAX Index pushed its advance to 7.6 percent.
Debt talks have been dictating stock moves, with European equities alternating between gains and losses almost every week since April. The benchmark gauge of European equities, which rose as much as 21 percent this year to a record, dropped 6.1 percent since then through the end of last week as negotiations between Greece and its creditors dragged on.
European bonds signaled caution, as investors sought the safety of Germany 10-year bunds, whose yield slipped 0.4 basis points to 0.86 percent. While higher-yielding debt in Europe’s periphery reversed earlier losses, the gains were muted compared with Germany.
A U.S.-listed exchange-traded fund tracking Greek equities slid 4.6 percent, reversing an earlier rise of 5.3 percent. American depositary receipts of National Bank of Greece SA were little changed after erasing a 13 percent advance.
Oil extended the biggest weekly drop since March, as investors weighed the prospects of Iran increasing exports with a nuclear deal between Iran and world powers near. West Texas Intermediate dropped 1 percent to to settle at $52.20 a barrel. Brent fell ended 1.2 percent lower to $57.85.
The MSCI Emerging Markets Index added 1.1 percent, capping the biggest three-day advance since Dec. 22, as Greece’s agreement with creditors spurred demand for riskier assets.