S&P 500 Gains as Banks Rally; Euro Falls on Draghi Speech
Most U.S. stocks rose, led by financial shares, as the Standard & Poor’s 500 Index extended its rally past 1,600. The euro fell as European Central Bank President Mario Draghi said policy will remain accommodative and the ECB will act again to boost growth if needed.
The S&P 500 climbed 0.2 percent to 1,617.50 at 4 p.m. in New York. The 17-nation euro lost 0.3 percent to $1.3076 and Japan’s currency fell 0.4 percent to 99.36 per dollar. Ten-year Treasury yields rose two basis points to 1.76 percent. Oil gained, while corn and wheat lost more than 2 percent. Malaysia’s benchmark stock index jumped to a record and the ringgit rallied as the ruling coalition won elections.
The euro extended losses as Draghi said the ECB is ready to cut interest rates again if needed after reducing them to a record last week. The yen’s decline came as last week’s drop in the U.S. jobless rate to a four-year low reduced demand for Japan’s currency as a haven. The S&P 500 topped 1,600 and the Dow Jones Industrial Average traded above 15,000 for the first time on May 3 following the employment report.
“Central banks are on the side of equity markets,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $180 billion, said by telephone. “There’s a lot of pessimism still. People don’t think this rally’s for real and are fighting it. Overall, I still think there’s room to go.”
The S&P 500 jumped 2 percent to a record last week after U.S. payrolls expanded by 165,000 workers in April and revisions to the prior two months added a total of 114,000 jobs to the employment count. The median forecast of economists in a Bloomberg survey called for an increase of 140,000 positions. Global equities also rose last week as the ECB cut its main refinancing rate.
About three stocks advanced for every two that fell in the U.S. and trading of S&P shares stocks was about 10 percent below the 30-day average.
Financial shares rallied the most out of 10 groups in the S&P 500, gaining 1 percent. Bank of America Corp. climbed 5.2 percent. MBIA Inc. will get about $1.6 billion as part of a deal to end five years of litigation against Bank of America and its Countrywide unit over claims of defective securitized mortgage loans, a person familiar with the matter said. MBIA jumped 45 percent, the most since 2008.
U.S. banks eased standards and terms on loans to businesses as commercial lending led a credit thaw, according to a Federal Reserve survey.
“Domestic banks, on balance, reported having eased their lending standards and having experienced stronger demand in several loan categories over the past three months,” the central bank said in its quarterly survey of senior loan officers released in Washington today. The fraction of banks easing standards for business loans was described as “relatively large.”
Cliffs Natural Resources Inc. (CLF) added 5.5 percent after being raised to outperform from market perform by FBR Capital Markets. Humana Inc. (HUM) climbed 2.1 percent as its rating was boosted by JPMorgan Chase & Co. Tyson Foods Inc. (TSN) slumped 3.3 percent after posting second-quarter profit and sales that missed estimates.
Birinyi Associates Inc., whose prediction the S&P 500 would reach 1,600 came true last week, purchased options betting on more gains. Birinyi said the S&P 500 may climb 18 percent to 1,900 should it conform to bull markets that began in 1982 and 1990. The Westport, Connecticut-based firm run by Laszlo Birinyi bought an unspecified amount of $170 calls on the SPDR S&P 500 ETF Trust (SPY), according to a report e-mailed to Bloomberg News today. They will become profitable if the S&P 500 gains more than 5 percent by December.
The euro weakened against nine of 16 major peers, while the dollar gained against 13 of 16. The Dollar Index, a gauge of the currency against six major peers, added 0.2 percent to 82.31 after slumping for two straight weeks. The yen was lower against 12 of 16 major peers.
The world’s biggest currency dealers expect the dollar’s weakness will prove temporary as U.S. growth accelerates in the second half of the year. Deutsche Bank AG, Citigroup Inc., UBS AG and Barclays Plc predict an advance of as much as 9 percent versus the euro by Dec. 31, even as the potential for more quantitative easing spurs concern that additional stimulus will debase the world’s reserve currency.
The Stoxx Europe 600 Index was little changed and the number of shares changing hands was 67 percent less than the 30- day average, data compiled by Bloomberg showed, as markets in U.K., Ireland and Greece closed for holiday. Linde AG (LIN) rose 2.8 percent after the German maker of industrial gases reported first-quarter profit that beat analyst estimates.
Spain, German Yields
Spain’s 10-year bond yield rose seven basis points to 4.11 percent after dropping to 3.94 percent on May 3, the lowest in almost three years. German 10-year bonds were little changed, with the yield at 1.24 percent.
Retail sales in the euro area fell 0.1 percent in March from the previous month, in line with a Bloomberg survey of analysts.
The FTSE Bursa Malaysia KLCI Index jumped 3.4 percent to a record and the ringgit rose 1.9 percent versus the dollar after the ruling coalition won elections. The jump in Malaysian stocks was the most since November 2008, and the ringgit rallied to 2.9793 per dollar, its biggest advance since June 2010. Malaysia’s Prime Minister Najib Razak won a majority in the nation’s election, allowing him to continue his economic reforms.
Oil pared gains following an earlier rally triggered when Syria’s state news agency said Israeli aircraft attacked a military research center yesterday, renewing concern that supplies in the Middle East would be disrupted.
West Texas Intermediate crude for June delivery gained as much as $1.56 to $97.17 a barrel in electronic trading on the New York Mercantile Exchange before trimming the advance to settle at $96.16 a barrel, up 55 cent on the day. Brent crude for June settlement increased 1.3 percent to $105.46 a barrel on the London-based ICE Futures Europe exchange.
“If the geopolitical events between Israel and Syria start to escalate, the market will automatically write in a premium and you should see a spike in the price of oil,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney.
Corn slumped 3.7 percent, the most in five weeks, on forecasts parts of the U.S. will turn drier after excessive rains, helping farmers in the world’s largest producer to accelerate planting and rebuild global inventories. Copper for July delivery fell 0.1 percent to $3.3105 a pound on the Comex in New York after jumping 6.8 percent on May 3, the most since October 2011.
Australia’s dollar fell against 15 of 16 peers as an unexpected contraction in retail sales in March added to speculation a weakening economy will prompt the central bank to cut interest rates to a record. The Australian dollar declined 0.6 percent to $1.0253 and slipped 0.3 percent to 101.86 yen.
The offshore yuan declined 0.4 percent to 6.1755 per dollar in Hong Kong. China’s currency regulator said it will increase scrutiny of cross-border capital flows by importers and exporters to prevent speculative funds entering the country disguised as trade bills.
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