Stocks Gain as Treasuries Fall After GDP Data; Oil Drops
U.S. stocks rose, halting a two-day drop, and Treasuries fell as American economic growth was revised higher and investors awaited Federal Reserve Chairman Ben S. Bernanke’s speech in two days. Oil slid as Hurricane Isaac’s landfall reduced threats to offshore energy facilities.
The Standard & Poor’s 500 Index added 0.1 percent to close at 1,410.49 at 4 p.m. in New York, while 10-year note yields climbed two basis points to 1.65 percent after touching a three- week low yesterday. Crude for October delivery lost 0.9 percent to $95.49 a barrel and gasoline fell 0.8 percent. The Dollar Index, a gauge of the currency against six major peers, climbed 0.2 percent to 81.564.
The U.S. economy grew at a 1.7 percent annual rate from April through June, up from an initial estimate of 1.5 percent, government data showed before Bernanke’s Aug. 31 speech in Jackson Hole, Wyoming. The Fed said today in its Beige Book survey that the U.S. economy continued to expand “gradually” in July and early August as improvement in housing and retail sales helped outweigh weakness in manufacturing.
“The market has already been pricing in low growth and basically all these points on the margin do co-operate with some other data that there is no imminent recession signal,” James Kee, president at South Texas Money Management in San Antonio, Texas, said in a phone interview. His firm oversees about $1.8 billion. “My advice is not to think that the Fed has silver bullets, there is a limit to what you can accomplish on the monetary side.”
Most regional Fed banks reported employment was “holding steady or growing only slightly,” the Fed said today in its Beige Book, a business survey based on reports from its 12 districts. The report reflects information collected on or before Aug. 20 and summarized by the Boston Fed.
Among U.S. stocks, WellPoint Inc. increased 7.7 percent after Angela Braly resigned as chairman and chief executive officer of the insurer. Yelp Inc. surged 23 percent as investor confidence in its growth prospects prevailed after a ban lifted on stock sales by some of the largest investors in the online review website.
Verizon Communications Inc., Walt Disney Co. and McDonald Corp. rose at least 0.6 percent to lead gains while Intel Corp. and Coca-Cola Co. fell more than 1 percent for he biggest decliners.
The S&P 500 has climbed 2.3 percent so far in August, poised for a third straight monthly gain and extending this year’s rally to 12 percent. Daily swings in the index have averaged less than 0.8 percent so far this month, the smallest fluctuation for any August since 1995, according to data compiled by Bloomberg.
The S&P 500 last week climbed to its highest level on an intraday basis in more than four years, then failed to close at that milestone.
The index has fluctuated near the 1,400 level for three weeks as trading slowed toward the end of the U.S. summer and investors awaited the Fed’s annual gathering in Jackson Hole to gauge prospects for a possible third round of so-called quantitative easing through asset purchases.
The Stoxx Europe 600 Index slipped 0.1 percent today, trimming its August advance to less than 2.2 percent. L’Oreal SA dropped 4.4 percent after the world’s largest cosmetics maker reported profit margins that missed analysts’ estimates. Bouygues SA tumbled 9 percent after the French building, television and telecommunications company trimmed the earnings forecast for its phone business. Banca Monte dei Paschi di Siena SpA sank 8 percent after posting a loss.
The MSCI Emerging Markets Index (MXEF) of stocks in developing nations lost 0.4 percent. The Shanghai Composite Index (SHCOMP) retreated 1 percent on a report China may slow the pace of monetary policy easing. Russia’s Micex Index lost 0.9 percent and India’s Sensex declined 0.8 percent. South Korea’s Kospi index jumped 0.8 percent.
Crude sank as much as 1.6 percent to $94.76 a barrel. Natural gas dropped as much as 1.5 percent to $2.575 per million British thermal units, the lowest in 10 weeks, before erasing declines and rising 0.8 percent amid forecasts for above-average temperatures that may boost demand for power-plant fuel.
U.S. crude supplies increased by 3.78 million barrels to 364.5 million barrels, while the median forecast of analysts called for a decrease of 1.75 million. As of 3 p.m. New York time, Isaac was 50 miles (80 kilometers) west-southwest of New Orleans, the National Hurricane Center said. Downgraded to a tropical storm, it was creeping northwest at 6 mph, with sustained winds of 70 mph, and dumping sheets of rain.
“The crude oil number was a surprise relative to expectations,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Isaac continues to cause damage along the Gulf but as far as the oil and gas industries are concerned it appears to have been a successful drill rather than a traumatic event.”
The S&P GSCI Index of raw-materials was little changed as corn, wheat, soybeans and cattle rose more than 1.5 percent to lead gains in 15 of its 24 commodities, while sugar, aluminum and oil fell the most.
Tin declined 5.2 percent in London, the biggest drop of the year on a closing basis, after PT Timah, the world’s third largest producer, restarted sales. Copper slipped for a third consecutive day in London.
Gold futures for December delivery slipped 0.4 percent to $1,663 an ounce, retreating for a second straight day after reaching the highest level since April.
Options traders are boosting bullish wagers on gold to an almost four-year high, betting Bernanke will hint at additional stimulus measures this week.
The ratio of outstanding calls to buy the SPDR Gold Trust versus puts to sell jumped to 2.69-to-1 on Aug. 24 and reached 2.76 earlier this month, the highest level since October 2008, according to data compiled by Bloomberg.
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