Stocks Advance With Commodities as Greece Moves Closer to Swap; Euro Gains
Stocks (MXWD) rose, sending the Standard & Poor’s 500 Index to its biggest back-to-back rally of the year, while commodities gained and the euro strengthened as Greece moved closer to completing its debt restructuring.
The S&P 500 advanced 1 percent to close at 1,365.91, with the two-day advance erasing its 1.5 percent drop on March 6. The Dow Jones Industrial Average increased 70.61 points to 12,907.94. The euro appreciated 0.9 percent to $1.3271, while the yen weakened against all 16 most-traded peers. Yields on 10- year U.S. Treasury notes increased four basis points to 2.02 percent. The S&P GSCI Index climbed 0.8 percent as 17 of its 24 commodities advanced.
Greece’s government got about 85 percent of bondholders to swap their holdings of the country’s debt for new securities in the biggest restructuring in history, a banking official said. Stocks (MXWD) also rallied as German industrial production grew 1.6 percent in January, while U.S. Labor Department data showed jobless claims remained at a level consistent with an improving economy. European Central Bank President Mario Draghi said surveys confirm signs of stabilization in the euro-area economy.
“There are plenty of things to worry about, but it is hard for investors to ignore multiple signals of optimism,” Ann Miletti, who helps oversee $209 billion as portfolio manager for Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said in an e-mail. “News that the Greek bond deal looks close to being approved is a positive for the global markets and domestically the data that is coming in continues to show hints of improving trends,” she said. “The data points make it seem like we have a good chance to continue to march higher.”
Rebound After Tumble
The S&P 500 climbed for a second day after slumping 1.5 percent on March 6, its worst drop since Dec. 8. Applications for unemployment insurance increased to 362,000 last week, Labor Department figures showed. Economists forecast 352,000 claims, according to the median estimate in a Bloomberg News survey. The Labor Department will report monthly jobs data tomorrow, with economists forecasting an increase of 225,000 private jobs and total non-farm payrolls growth of 210,000.
Alcoa Inc., Caterpillar Inc. and DuPont Co. rose at least 1.7 percent to lead gains in 26 of 30 stocks in the Dow. Monsanto Co. and General Electric Co. added at least 1.4 percent commodity producers and industrial shares led gains among all 10 of the main industry groups in the S&P 500.
The S&P 500, which reached an almost four-year high last week, has rallied 24 percent from last year’s low in October and is up 8.6 percent in 2012 in its best start to a year since 1998.
‘Race Is Still On’
“While we may have stumbled for a day or two, I think the race is still on,” Laszlo Birinyi, founder of the Westport, Connecticut-based firm Birinyi Associates Inc., said on Bloomberg Television’s “In the Loop with Betty Liu.” He reiterated his call that the S&P 500 has the potential to reach a record 1,700 this year should economic growth surprise investors. “Stay with it, don’t try to get too cute, don’t be defensive, and keep the possibility of a really good market on the table.”
American International Group Inc. retreated 3.9 percent as the U.S. Treasury Department said it is selling $6 billion in shares of the bailed-out insurer.
The Stoxx Europe 600 Index climbed 1.6 percent as 10 shares advanced for each that fell. European Aeronautic, Defence & Space Co. (EAD) rallied 11 percent to a five-year high after doubling its dividend and predicting earnings will climb. Gemalto NV jumped 8.8 percent as the inventor of the smart chip used in bank and phone cards forecast revenue and operating profit will increase this year.
‘Signs of a Stabilization’
The 17-nation euro rose against 10 of 16 major peers, appreciating 1.6 percent against the yen. The ECB kept its benchmark interest rate unchanged and Draghi said “the risk environment has improved enormously” as recent surveys “confirm signs of a stabilization” in the euro-area economy. The outlook is “still subject to downside risks,” he said.
The pound rose 0.6 percent versus the dollar as the Bank of England kept the benchmark rate at 0.5 percent and maintained its bond purchase target.
The yen fell the most against the Norwegian krone and Mexican peso, losing at least 1.8 percent versus each. Japan’s gross domestic product shrank an annualized 0.7 percent in the fourth quarter, compared with an earlier estimate for a 2.3 percent contraction.
Italian bonds rallied, with the extra yield investors demand to hold the nation’s 10-year debt instead of benchmark German bunds falling 16 basis points to a six-month low of 3.01 percentage points. The Spanish-German yield spread narrowed six basis points to 3.26 percentage points. The yield on the bund advanced three basis points, snapping a two-day decline.
The cost of insuring against default on European sovereign debt fell for a second day. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments dropped 5.8 basis points to 348.5.
Greek Finance Minister Evangelos Venizelos will hold a press conference at 1 p.m. Athens time tomorrow. Preliminary indications after the deadline for the swap expired at 10 p.m. in Athens showed that as much as 155 billion euros of the 177 billion-euro Greek-law bonds were offered, according to the official in Athens, who declined to be identified. Another 12 billion euros of 18 billion euros of debt under non-Greek law was also tendered, the official said. Another 7 billion euros of debt from state-owned companies guaranteed by the government was also offered, the official said.
The goal of the exchange is to reduce the 206 billion euros of privately held Greek debt by 53.5 percent and tame the debt crisis that has roiled Europe for more than two years.
Under the rules of the exchange, investors holding at least 50 percent of the eligible bonds must vote on the swap, and 66 percent of those must agree to amend the bonds to enable the government to impose collective action clauses, said Christoph Rieger, Commerzbank’s head of fixed-income strategy.
Oil increased 0.4 percent to $106.58 a barrel. U.S. lawmakers proposed new measures against Iran’s nuclear program, while Barclays Capital said shipments from the Persian Gulf nation have dropped by up to 400,000 barrels a day.
The MSCI Emerging Markets Index (MXEF) rose 1.7 percent, snapping a three-day slump. Hon Hai Precision Industry Co. (2317) led Apple Inc. suppliers higher after the U.S. company introduced a new version of its IPad. China’s Shanghai Composite Index (IFB1) increased 1.1 percent. Vietnam’s VN Index (VNINDEX) sank 2.8 percent, the biggest drop among major stock benchmarks tracked by Bloomberg, after the government raised gasoline prices.
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