S&P 500 Index Tops Its Best Close Since 2008 as Oil, Treasury Yields Gain
U.S. equities pared early gains as a surge in oil dragged down transportation and consumer shares while Greece’s approval for a second bailout failed to spur enough confidence to keep the Standard & Poor’s 500 Index at an almost four-year high. Treasuries declined.
The S&P 500 rose 0.1 percent to 1,362.21 at 4 p.m. in New York after earlier climbing as much as 0.5 percent to top its highest closing level since June 2008. The Dow Jones Industrial Average trimmed its advance after climbing above 13,000 for the first time since May 2008. The Stoxx Europe 600 Index lost 0.5 percent. The 10-year U.S. Treasury yield jumped six basis points to 2.06 percent. Oil reached a nine-month high near $106 a barrel as Iran said it stopped selling to France and Britain.
European finance ministers approved 130 billion euros ($173 billion) in aid for Greece by tapping into European Central Bank profits and coaxing investors into providing more debt relief to shield the region from a default. The early rally in U.S. equities was also triggered by better- than-estimated earnings at companies from Home Depot Inc. to Macy’s Inc.
“When you reach a headline level, there’s always some fall-back in the short-term,” Madelynn Matlock, who helps oversee about $14.5 billion at Huntington Asset Advisors in Cincinnati, said in a telephone interview. “Having a deal in Greece means that at least in March we don’t have the prospect of a disorderly default facing us. Obviously, this doesn’t solve any long-term problems. On top of that, in a climate where nobody in the developed world has wonderful growth, the last thing you need is higher oil prices.”
Energy, Airline Shares
Energy companies in the S&P 500 rallied 0.8 percent as a group, paced by gains of more than 1 percent in Exxon Mobil Corp. and Chevron Corp. The Bloomberg U.S. Airlines Index slumped 6.4 percent, the most since October, amid concern about higher fuel costs. US Airways Group Inc. lost 11 percent and United Continental Holdings Inc. sank 9.1 percent.
Gauges of clothing makers and retailers of food and consumer staples lost at least 1.4 percent for the biggest declines among 24 industries in the S&P 500. Wal-Mart Stores Inc. (WMT) slid 3.9 percent, the most since August, after the biggest retailer’s quarterly earnings trailed analysts’ estimates as an emphasis on low prices hurt margins.
The S&P 500 earlier rose as much as 0.5 percent to 1,367.76, above its highest close since June 2008. Alcoa Inc. (AA) rose 2.6 percent for the biggest gain in the Dow, which closed 15.82 points higher at 12,965.69 after climbing as high as 13,005.04.
About three shares fell for each that advanced in the Stoxx 600 (SXXP). Segro Plc, the U.K.’s largest publicly traded owner of industrial properties, sank 2.1 percent after saying net asset value declined 9.8 percent. Real-estate companies fell 1.5 percent as a group for the biggest drop among 19 industries.
Europe is still struggling to avoid the threat of default as investors warned Greece will soon risk violating the terms of its second bailout in three years. The nation signed up to a program of austerity and economic reform aimed at slashing debt to 120.5 percent of gross domestic product by 2020 from about 160 percent last year.
Economists from Citigroup Inc. to Commerzbank AG concluded Greece may again fail to deliver on austerity goals amid a fifth year of recession, looming elections and social unrest.
“The Greek bailout keeps the wheels on the bus,” James Dunigan, who helps oversee $107 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a phone interview. “The ride is a little smoother, but it doesn’t solve the longer-term issues.”
The two-year Treasury yield increased less than one basis point to 0.303 percent following an auction of $35 billion of the notes. The notes yielded 0.310 percent, matching 0.310 percent in pre-auction treading and compared with 0.25 percent at the previous sale on Jan. 24. The Treasury auction drew a bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, of 3.54 compared with an average of the past 10 auctions of 3.49 percent.
The Dollar Index, which tracks the U.S. currency against those of six trading partners, fell 0.3 percent. The Australian dollar weakened against all 16 of its major counterparts, losing 0.8 percent versus the U.S. currency, after minutes of the nation’s most-recent central bank policy meeting showed there is scope for monetary easing.
Brent oil for April settlement increased $1.63, or 1.4 percent, to $121.68 a barrel on the London-based ICE Futures Europe exchange.
Iran stopped selling oil to France and Britain yesterday, preempting a European Union ban, an official news website said. EU nations bought a combined 18 percent of Iran’s exports of crude and condensates, or 452,000 barrels a day, in the first half of 2011, according to the U.S. Energy Department. France purchased 49,000 barrels a day and the U.K. 11,000 barrels.
Nineteen of the 24 commodities tracked by the S&P GSCI Index advanced, sending the gauge up 1.7 percent. Copper advanced the most in 11 weeks, climbing 3.5 percent to $3.8445 a pound in New York. Spot gold increased 1.2 percent to $1,755.60 an ounce and silver advanced 3.7 percent.
Commodities also rallied in the first U.S. trading session since China’s central bank cut reserve requirements for banks in an effort to boost lending and support economic growth. U.S. markets were closed yesterday for the Presidents’ Day holiday.
The yield on the Spanish two-year note declined seven basis points to 2.76 percent as the government sold 2.5 billion euros of three- and six-month bills. The yield on the 10-year Italian bond dropped four basis points to 5.44 percent, driving the extra yield investors demand to hold the securities instead of bunds six basis points lower.
The MSCI Emerging Markets Index (MXEF) lost 0.3 percent. Russia’s Micex Index slid 1.3 percent. The Turkish lira slipped 0.6 percent after the central bank cut its highest lending rates. India’s Sensex rose 0.8 percent after trading resumed following yesterday’s holiday.
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