S&P 500 Returns to Gains as Risk Revival Fuels World Stock Rally

Why Energy Is Bull Market's Last Great Opportunity
  • U.S. biotech stocks rebound as energy shares extend advance
  • Emerging-market assets surge, with equities at six-week high

Increasing demand for risk assets sent global equities to their longest rally since April, while gold and Treasuries slid.

Biotechnology shares rebounded from Tuesday’s selloff to lead the Standard & Poor’s 500 Index to its highest level since August. Emerging-market assets surged as persistent weakness in the dollar spurred gains among commodities producers. Benchmark indexes in Europe and Canada extended winning streaks, even as oil halted its rally.

Stocks worldwide have started to bounce back in October, while the dollar languishes
Stocks worldwide have started to bounce back in October, while the dollar languishes

Global stocks are recovering from their worst quarter since 2011 as bets the Federal Reserve will keep interest rates near zero spurs demand for assets that benefit from an environment where borrowing is cheap. Beaten down sectors from energy to raw materials have led a six-day rally as commodities surged. The S&P 500 is making a fresh run at a level where it has stalled previously following its August rout. Having largely missed the rebound, Chinese markets resume Thursday after a week-long holiday.

“The commodity rally extending itself is a significant story,” said Andrew Burkly, head of institutional portfolio strategy at Oppenheimer & Co. in New York. “China comes back on the line tomorrow, and with China closed the last six or eight days, we’ve seen our market do better and commodities do better.”

Stocks

The MSCI All-Country World Index jumped 1 percent Wednesday for a sixth day of gains, its longest advance since April. The S&P 500 was up 0.8 percent to 1,995.83 by 4 p.m. in New York, closing at the highest level since Aug. 20, and within a point of its average price for the past 50 days. Biotechnology shares in the index surged 1.7 percent to pace gains after the group tumbled Tuesday. 

Energy and materials producers climbed at least 1.3 percent, with both industries capping seven-day winning streaks that have added more than 11 percent in gains. The S&P 500 has surged 6.1 percent in that time, including a five-day rally halted Tuesday that was the gauge’s longest of the year.

The S&P 500 remains about 4.5 percent below a level reached on Aug. 11, the day China’s surprise currency devaluation roiled global financial markets and sent the index careening into a correction.

Investors will increasingly turn their attention toward corporate earnings to gauge the health of the U.S. economy. Analysts project profit for S&P 500 members dropped 6.9 percent in the third quarter. Alcoa Inc. reports after markets close Thursday, while companies reporting next week include Johnson & Johnson, Intel Corp. and JPMorgan Chase & Co.

U.S.-listed shares of Deutsche Bank AG slipped more than 4 percent in after-hours trading as the company, Europe’s biggest investment bank, said it expects to report a third-quarter net loss and may eliminate its dividend for the year after writing down the value of its two biggest divisions and boosting its reserve for legal costs.

The Stoxx Europe 600 Index increased 0.1 percent, capping a fourth day of advances, while Canada’s benchmark index jumped 1.5 percent to its highest level since August. The MSCI Asia Pacific Index jumped 2.1 percent Wednesday, extending its longest run of gains since April as shares from Japan to Hong Kong climbed.

Commodities

Oil fell from a one-month high after a U.S. government report showed crude inventories in the country rose last week. West Texas Intermediate futures slipped 1.5 percent to settle at $47.81 a barrel in New York following three days of gains, while Brent lost 1.1 percent to end at $51.33.

Oil stockpiles rose for a second week, according to the Energy Information Administration, while supplies at Cushing, Oklahoma, the delivery point for WTI contracts, increased for the first time in six weeks. Production rebounded from a 10-month low.

Copper advanced to a two-week high, with futures rising 0.5 percent to settle at $2.367 a pound in New York, as investors weighed the impact of supply cuts on the global market. Other industrial metals also advanced, helping boost shares of mining companies.

The Bloomberg Commodity Index fell 0.2 percent from its highest level since the end of August as wheat and coffee joined oil in declining.

Emerging Markets

The MSCI Emerging Markets Index added 2.7 percent to its highest closing level since Aug. 17, led by gains in energy and technology stocks. The gauge capped the steepest six-day rally since December 2011.

A gauge of developing-nation currencies jumped to a seven-week high as investors become increasingly confident that the Fed will refrain from increasing U.S. rates until next year.

Bonds

Government bonds declined as stocks rose, dimming the appeal of haven assets.

Yields on 10-year Treasuries increased four basis points, or 0.04 percentage point, to 2.07 percent. The U.S. attracted the strongest demand in more than four years from a class of buyers that includes mutual funds at a $21 billion auction of 10-year notes Wednesday.

Similar maturity Japanese debt yielded 0.34 percent, up one basis point, while rates on German bunds due in a decade were little changed at 0.59 percent. Ten-year Australian yields rose a second day, adding three basis points to 2.63 percent.

Currencies

The Bloomberg Dollar Spot Index was little changed near a three-week low as some high-yielding currencies extended gains. New Zealand’s dollar surged 1 percent after global dairy prices climbed for a fourth straight auction. Taiwan’s dollar was the best performer among major currencies, jumping 1.3 percent.

The yen rose for a second day against the U.S. currency after the Bank of Japan refrained from adding to its already unprecedented monetary stimulus at the end of a two-day policy meeting.

The yen strengthened 0.2 percent at 120.01 per dollar, and gained 0.5 percent to 134.86 per euro. Europe’s shared currency weakened 0.2 percent to $1.1245, after data showed German industrial production unexpectedly declined in August.

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