U.S. Stocks Halt 5-Day Slide Amid Oil Rally; Treasuries Weaken

Have Central Banks Run Out of Bullets?
  • S&P 500 pares weekly decline, Stoxx 600 jumps from 2013 low
  • Oil surges 11 percent to surpass $29 a barrel in New York

U.S. stocks halted a five-day slide that dragged global equities into a bear market, as oil rebounded with its best day in seven years and bank shares jumped the most since 2011. Treasuries had the biggest drop of the year.

The Standard & Poor’s 500 Index’s rally trimmed its loss for the week to less than 1 percent amid data showing higher retail sales. Lenders rallied 4 percent after JPMorgan Chase & Co.’s Jamie Dimon said he bought more shares in the bank, while Commerzbank AG’s results helped European equities rebound from the lowest level since 2013. The yield on 10-year Treasuries climbed for the first time in six days. Crude rallied 12 percent from a 12-year low to top $29 a barrel in New York.

U.S. and European shares finished a tumultuous week on a high note, as Commerzbank’s results eased concern that lenders won’t find ways to be profitable amid dwindling interest rates. Dimon’s vote of confidence was echoed by Norway’s sovereign wealth fund, which boosted its stake in Credit Suisse AG. At the same time, crude delivered its biggest rally in three weeks, providing a respite from a rout that took oil to the lowest settlement since 2003.

“Most of the people out there feel like the downdraft isn’t a big crash in the making, so everyone is looking for a time to buy,” Phillip Titzer, who helps oversee about $1.4 billion as vice president of investment operations at Edgar Lomax Co. in Springfield, Virginia. “This might just be some investing of some cash with people thinking prices look good now. There isn’t any huge development, but oil is up and so many times we see oil go up and stocks go up.”

World Bear Market: Is More Volatility Ahead?

Investors spent the first four days of the week selling riskier assets amid growing signs that central-bank policy tools were losing their stimulative effects. Federal Reserve Chair Janet Yellen signaled financial-market volatility could delay rate increases as the central bank assesses the impact of recent turmoil on domestic growth. Data Friday showed retail sales increased last month as Americans kicked off 2016 by spending freely. Sentiment declined in February to a four-month low as declining stock prices and weaker global conditions weighed on Americans’ views of the economy.

Stocks

The Standard & Poor’s 500 Index climbed 2 percent at 4 p.m. in New York, capping its biggest gain in two weeks. Even with the rebound today, U.S. stocks fell 0.8 percent for a second week of declines. Markets are closed Monday for the Presidents Day holiday.

Banks, which have been the biggest source of pain for U.S. stocks in the market’s latest rout, led gains, capping the steepest rally since November 2011. JPMorgan Chase added 8.3 percent, the most since 2011, after Dimon spent $26.6 million on shares. Bank of America Corp., Citigroup Inc. and Goldman Sachs Group Inc. also climbed at least 3.9 percent. Energy stocks also rallied. Kinder Morgan Inc. and Transocean Ltd. climbed more than 2.9 percent.

Emerging Markets

Emerging-market assets stabilized, with the oil rebound and data showing the euro-area’s economy expanded at the end of 2015 helping ease the worst week in a month. The MSCI Emerging Markets Index was little changed. It fell 3.6 percent in the week

The index has dropped 10 percent this year and is valued at 10.7 times estimated 12-month earnings, compared with 14 for the MSCI World Index of developed markets, which dropped 12 percent in 2016.

A Bloomberg gauge tracking 20 developing-nation exchange rates against the dollar increased 0.3 percent from a one-week low.

Currencies

The dollar rose from near a three-month low as signs the U.S. consumer remains strong added to the case for interest-rate increases this year. The currency snapped four days of losses versus the yen, rising from its weakest since October 2014 on signals the loss may have become overdone.

The U.S. currency added 0.5 percent to 112.96 yen and climbed 0.8 percent to $1.1235 per euro.

The yen headed for its biggest two-week gain versus the dollar since 1998 during the Asian financial crisis, intensifying speculation Japanese authorities could intervene to weaken it.

Bonds

The retail sales helped benchmark 10-year notes snap a six-day rally that pushed yields near record-low levels. The yield rose eight basis points to 1.74 percent Friday, though Treasuries still had a third weekly gain as turmoil in global financial markets drove demand for the relative safety of U.S. government debt and as traders pared bets the Fed will raise rates this year.

Germany’s 10-year bund yield rose seven basis points to 0.26 percent, having slid on Thursday to its lowest since April on investor demand for havens. Italy’s 10-year bond yield fell six basis points to 1.65 percent and Spain’s dropped four basis points to 1.74 percent, still up from 1.64 percent on Feb. 5.

Deutsche Bank AG plans to buy back about $5.4 billion of bonds, including some it issued barely a month ago, to reverse an investor stampede away from its stock and debt.

Commodities

Oil rebounded from the lowest level in more than 12 years amid speculation that oil producers could cooperate to reduce the surplus. West Texas Intermediate gained 12 percent to settle at $29.44 a barrel, paring a weekly drop. Brent for April settlement gained 11 percent to end at $33.23 a barrel in London.
 
The CBOE Crude Oil Volatility Index, which measures expectations of price swings, climbed to the highest level in seven years Thursday. Producers are ready to work together and suppliers won’t make cuts unless there is complete cooperation, United Arab Emirates Oil Minister Suhail Al Mazrouei said on a Sky News Arabia report posted online Feb. 10.
 
Industrial metals also advanced. Nickel climbed 1.7 percent, rebounding from a 13-year low. Copper rose 1.1 percent and aluminum added 0.9 percent.
 
Gold capped its biggest weekly gain in seven years, even as prices fell on Friday. The metal dropped 0.7 percent to settle at $1,239.40 an ounce after surging Thursday to its highest level in a year. Bullion climbed 7.1 percent for the week.

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