U.S. Stocks Gain After Budget Talks While Oil Rallies
U.S. stocks rose, trimming a weekly slump, as House Speaker John Boehner said budget talks with President Barack Obama were constructive and he would accept an increase in government revenue if coupled with spending cuts. Commodities climbed and Treasuries pared an earlier advance.
The Standard & Poor’s 500 Index increased 0.5 percent to close at 1,359.88 at 4 p.m. in New York, rebounding from its lowest level since July. The Stoxx Europe 600 Index ended down 1 percent at the lowest since August. Oil added 1.4 percent as conflict escalated in Israel. Treasury 10-year yields fell 1.4 basis points to 1.58 percent. Japan’s Topix Index (TPX) had its best two-day gain in 19 months on speculation of monetary easing.
Stocks erased earlier losses as Boehner’s remarks spurred optimism that lawmakers would reach an agreement to avoid a $607 billion deficit-cutting package known as the fiscal cliff. Earlier declines also were triggered as Israel extended its bombing of the Gaza Strip and militant Palestinian groups fired rockets at the Jewish state.
“Any tidbit of hope on the fiscal-cliff front would lead to a positive response,” said Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama. “That’s been the driving force in the market.”
Obama held his first face-to-face conversation with Boehner since the presidential election. The president also hosted House Minority Leader Nancy Pelosi, a California Democrat, Senate Majority Leader Harry Reid, a Nevada Democrat, and Senate Minority Leader Mitch McConnell, a Kentucky Republican.
The S&P 500 retreated for a second straight week and has lost almost 5 percent since the Nov. 6 election set up a budget showdown between Obama and the Republican-controlled House. The Dow Jones Industrial Average slid for a fourth straight week, it’s longest slump since August 2011. Ten-year Treasury notes increased in six of seven sessions since the election and yields today touched a 10-week low.
“The markets are very shaky,” former Federal Reserve Chairman Alan Greenspan told Bloomberg Television’s “In the Loop” program with Betty Liu. “The markets will crater if we run into any evidence that we can’t solve this problem,” he said. “If we get out of this with a moderate recession, I would say the price is very cheap. The presumption that we’re going to solve this problem without pain, I think, is grossly inappropriate.”
Among the 10 main industry groups in the S&P 500, health- care, utility and consumer companies rose at least 0.6 percent as groups to lead gains. Alcoa Inc., Home Depot Inc., UnitedHealth Group Inc. and American Express Co. rose more than 1.2 percent for the best gains in the Dow.
Gap Inc. (GPS), the largest U.S. specialty-apparel retailer, increased 1 percent after raising its full-year earnings forecast as sales in North America advanced.
Dell Inc. (DELL) tumbled 7.3 percent after predicting fourth- quarter revenue of as little as $14 billion, less than the $14.5 billion average of analyst estimates compiled by Bloomberg. Dynavax Technologies Corp. slid 47 percent after its hepatitis B vaccine failed to win the backing of U.S. regulatory advisers. Sears Holdings Corp. lost 19 percent after posting a wider-than- forecast loss and a 23rd straight quarterly sales decline.
The 10-year Treasury yield trimmed an earlier decline of as much as four basis points. Bank of America Merrill Lynch’s MOVE index, which measures price swings on Treasuries based on options, dropped to 55.6 yesterday, its lowest level since June 5, 2007.
The Stoxx 600 dropped below its closing level on Aug. 2, the day before European Central Bank President Mario Draghi announced a plan to buy the debt of euro-area countries that ask for its help.
STMicroelectronics NV (STM) lost 2.3 percent after people familiar with the situation said that Europe’s largest semiconductor maker will probably decide against splitting itself into two units. French and Italian executives disagreed over the proposal, said the people who asked not to be identified. Henkel AG plunged 4.7 percent as the maker of Persil washing powder posted sales growth that missed estimates.
The Topix climbed 1.9 percent, extending yesterday’s 2.1 percent rally, on signs that an opposition party that advocates unlimited monetary stimulus will win next month’s election in Japan. Mazda Motor Corp. and Nikon Corp. surged more than 7 percent in Tokyo as the yen’s depreciation against the dollar this week aided their earnings outlook.
Oil futures advanced 1.4 percent to $86.67 a barrel, erasing yesterday’s 1 percent drop, amid concern that the clash between Israel and Hamas will escalate into a wider conflict and threaten supplies from the Middle East.
Crude and natural gas led gains in 12 of 24 commodities tracked by the S&P GSCI Index, sending the index up 0.5 percent.
Emerging-market stocks fell for a seventh day, their longest losing streak in four months, amid concern China’s new leaders may slow efforts to reduce the government’s grip on the economy. The Shanghai Composite Index sank as much as 1.4 percent to its lowest level in more than 3 1/2 years, before paring its drop to 0.8 percent. South Korea’s KOSPI declined 0.5 percent to its lowest level in more than three months.
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