U.S. Stocks Rise Amid Earnings as Pound Jumps on Economy
U.S. stocks rose as jobless claims fell and earnings topped forecasts, while the pound strengthened against the dollar after data showed the U.K. economy avoided a triple-dip recession. Gold rallied for a second day.
The Standard & Poor’s 500 Index added 0.4 percent, approaching its record high, at 4 p.m. in New York. The Stoxx Europe 600 Index jumped for a fifth straight day, gaining 0.8 percent. Britain’s currency appreciated 1.1 percent to $1.5431, the most since March 14, and the 10-year U.K. yield advanced four basis points to 1.73 percent. Gold led a rally in commodities, posting its biggest increase since June. Copper, silver and oil each surged more than 2 percent.
Earnings from United Parcel Services Inc. to Dow Chemical Co. topped estimates. Applications for jobless benefits fell to the lowest since March 9, according to the Labor Department. Britain’s economy grew a more-than-estimated 0.3 percent in the first quarter after contracting 0.3 percent in the previous period, the Office for National Statistics said.
“The majority of companies are continuing to beat expectations, so that’s a good sign,” Peter Jankovskis, who helps oversee $3 billion as co-chief investment officer of Lisle, Illinois-based Oakbrook Investments LLC, said by telephone. “The jobless claims were better-than-expected, so that’s providing some support. We do have the possibility of additional gains in the second half of the year, particularly if we see growth begin to pick up.”
U.S. jobless claims decreased by 16,000 to 339,000 in the week ended April 20, less than 350,000 figure in a Bloomberg survey, according to Labor Department data. Earnings beat estimates at 73 percent of the 236 companies in the S&P 500 that posted results so far this season, according to data compiled by Bloomberg.
UPS gained 2.3 percent after posting higher earnings than estimated as the world’s largest package-delivery company carried more purchases to online shoppers. Dow Chemical, the largest U.S. chemical maker by sales, jumped 5.6 percent as corn-seed sales rose and lower prices for natural gas boosted earnings from plastics.
3M Co. slid 2.8 percent. The maker of products ranging from Scotch tape to dental braces cut its annual earnings forecast after quarterly profit trailed estimates for the first time in 1 1/2 years amid a slowing global economy. Exxon Mobil (XOM) Corp., the world’s largest company by market value, dropped 1.5 percent as sales fell 12 percent on lower crude production and prices.
The S&P 500 has surged 134 percent from a 12-year low in 2009 as corporate earnings beat analyst estimates and the Federal Reserve embarked on three rounds of bond purchases to spur economic growth. The gauge has risen 2.8 percent since April 18. It is less than 10 points away from a record 1,593.37 reached on April 11.
The Chicago Board Options Exchange opened for trading three-and-a-half hours late today after a problem with its computer systems shut the derivatives market. Ed Provost, chief business development officer for CBOE Holdings Inc., said a “software glitch” caused the outtage. The CBOE Volatility Index, or VIX, rose 0.1 percent to 13.62.
Treasuries fell, with 10-year note yields gaining one basis point to 1.72 percent. The yield fell to 1.64 percent on April 23, the lowest since Dec. 12.
The pound strengthened at least 0.6 percent against all of its 16 major peers, appreciating 1.1 percent to 84.29 pence per euro. Today’s advance trimmed this year’s decline versus the dollar to 5.1 percent.
“Sterling is trading higher and I would expect further gains,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London. “The data puts another nail in the coffin for further money printing.”
The yen climbed 0.1 percent to 99.37 per dollar after the Ministry of Finance said Japanese investors were net sellers of overseas debt for a sixth week through April 19. Prime Minister Shinzo Abe said before a central bank review of policy tomorrow that monetary easing has produced good results.
Central banks, guardians of the world’s $11 trillion in foreign-exchange reserves, are buying stocks in record amounts as falling bond yields push even risk-averse investors toward equities.
In a survey of 60 central bankers this month by Central Banking Publications and Royal Bank of Scotland Group Plc, 23 percent said they own shares or plan to buy them. The Bank of Japan (8301), holder of the second-biggest reserves, said April 4 it will more than double investments in equity exchange-traded funds to 3.5 trillion yen ($35.2 billion) by 2014. The Bank of Israel bought stocks for the first time last year while the Swiss National Bank and the Czech National Bank have boosted their holdings to at least 10 percent of reserves.
In the U.S., debate among central bank policy makers is shifting away from the timing of a reduction in bond buying to the need to extend record stimulus as inflation cools and 11.7 million Americans remain jobless. The Federal Open Market Committee will meet April 30-May 1.
“The market is really looking at continued easing by the Fed,” Greg Woodard, a portfolio strategist at Manning & Napier in Fairport, New York, said by phone. His firm had $45.2 billion under management at the end of 2012. “They’re looking for signals of when the Fed is going to start to reverse that. Our view is that probably it’s going to be some time away.”
Almost three shares rose for every one that declined in the Stoxx 600. (SXXP) The index climbed for a fifth straight day, the longest string of advances since December. It has rallied 4.6 percent since April 18.
British American Tobacco Plc climbed 1.2 percent as Europe’s largest cigarette maker reported revenue growth that beat estimates. Royal KPN NV (KPN) sank 6.8 percent as the Dutch phone company set the terms of a 3 billion-euro ($3.9 billion) share sale at a discount of 62 percent from the stock’s market value.
Gold rallied 2.7 percent to $1,462 an ounce, the biggest jump since June 29. Russia’s gold reserves climbed by 4.7 metric tons to 981.6 tons in March and Kazakhstan’s holdings climbed 1.2 tons to 122.9 tons, according to International Monetary Fund data released overnight. Futures have rebounded 11 percent since dropping to a two-year low on April 16.
Silver climbed 5.7 percent, the biggest rise since January 2012.
The S&P GSCI gauge of 24 commodities rose 1.5 percent, its biggest gain since Nov. 19, after climbing yesterday 1.2 percent. West Texas Intermediate oil advanced for a sixth day, the longest rally in nine months, rising 2.4 percent to $93.64 a barrel. Copper jumped 2.4 percent, the most in seven months and its second consecutive advance.
Italy’s government bonds declined for a second day amid speculation a rally that took the nation’s 10-year yield below 4 percent for the first time since November 2010 had gone too far. Pacific Investment Management Co. said yesterday it reduced its holdings of Italian and Spanish debt. The yield on Italy’s 10- year note climbed five basis points to 4.06 percent.
The MSCI Emerging Markets Index (MXEF) rose 1 percent, gaining for a second day and reaching a two-week high. South Korea’s Kospi climbed 0.8 percent and the won appreciated 0.5 percent versus the dollar after the economy grew by a faster-than-estimated 0.9 percent last quarter.
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