Commodity Index Drops as Treasuries Advance With S&P 500
Industrial metals led a gauge of commodities to a four-month low, while the dollar weakened and Treasuries rose, as investors assessed economic data for clues to future policy moves from central banks. U.S. shares rose a second day and European stocks closed at a five-year high.
The S&P GSCI Index (SPGSCI) of 24 commodities lost 0.3 percent to 610.66 by 4:10 p.m. in New York as copper slid 1.3 percent and natural gas sank 1.9 percent. The Bloomberg U.S. Dollar Index, a gauge of the currency against 10 major peers, fell 0.3 percent after climbing for six straight days in its longest rally since May. Ten-year Treasury yields decreased two basis points to 2.60 percent. The Standard & Poor’s 500 Index (SPX) rose 0.4 percent, while the Stoxx Europe 600 Index climbed 0.3 percent.
The euro rebounded from a six-week low versus the dollar as expanding manufacturing in the region fueled speculation the European Central Bank won’t cut interest rates this week. U.S. factory orders grew 1.7 percent in September. Federal Reserve Bank of Dallas President Richard Fisher said the U.S. should resume normal monetary policy as soon as possible, while Fed Bank of St. Louis President James Bullard said they may keep the current pace of stimulus even if the job market improves.
“Tapering hasn’t happened yet, but it’s certainly hanging out there and is likely to happen probably sometime in the first quarter of next year,” Peter Jankovskis, who helps oversee $3.5 billion as co-chief investment officer of Lisle, Illinois-based Oakbrook Investments LLC, said in a phone interview. “That’s a big factor weighing on the commodity markets. As they ease out of that program, the economy will have to stand on its own two feet, and that’s going to take some time.”
Eighteen of the 24 commodities tracked by the S&P GSCI gauge retreated. Copper declined for a third day, sliding to $7,149 a metric ton, and lead dropped 1.3 percent. West Texas Intermediate oil settled little changed at $94.62 a barrel. U.S. natural gas dropped as much as 3.1 percent to $3.406 per million British thermal units, the lowest price since Sept. 26, on forecasts for moderate November temperatures that would limit demand for the heating fuel.
The dollar weakened against 13 of 16 major peers, losing the most against the Swedish krona, South African rand, Mexican peso and Australian dollar. The Aussie advanced 0.8 percent to 95.11 U.S. cents.
The euro appreciated 0.2 percent to $1.3515 after earlier touching the weakest level since Sept. 18. German 10-year yields were down 1.5 basis points, or 0.015 percentage point, at 1.68 percent.
Bank of America Corp., Royal Bank of Scotland Group Plc and UBS AG predict the European Central Bank will cut its main refinancing rate to 0.25 percent Nov. 7. BNP Paribas SA, Societe Generale SA, JPMorgan Chase & Co., ABN Amro Bank NV, Nomura Holdings Inc. and Scotiabank predict a reduction in December, when the ECB will publish new economic projections.
“In the short term, if we don’t get a decision from the ECB to cut rates, we’ll basically pull a bit higher,” Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in New York, said by phone, referring to the euro. “The ECB may be signaling a dovish message but not cutting rates at this meeting, but maybe at the next.”
Among U.S. stocks moving today, Kellogg Co. (K) added 0.7 percent after announcing it will reduce its global workforce by seven percent as part of a four-year cost-saving plan. U.S. Steel Corp. rose 4.4 percent and AK Steel Holding Corp. rallied 8.7 percent as Goldman Sachs Group Inc. (GS) raised its ratings on the companies. BlackBerry Ltd. tumbled 16 percent as Fairfax Financial Holdings Ltd. walked away from a $4.7 billion takeover plan.
Twitter Inc. will probably price its initial public offering above an increased range announced earlier in the day, according to two people with knowledge of the matter who asked not to be named because the information is private.
The technology company boosted its asking price to $23 to $25 a share today, from a range of $17 to $20. The IPO is already several times oversubscribed at $25, said the people.
The S&P 500 has risen for four straight weeks, the longest stretch of gains since July. Of the 373 index members that have reported so far this earnings season, 76 percent beat profit estimates while 54 percent exceeded sales projections, data compiled by Bloomberg show.
Anadarko Petroleum Corp. (APC) fell about 1.8 percent in extended trading after reporting lower earnings-per-share than analysts estimated after markets in New York closed.
“The path of least resistance continues to be up,” James Dunigan, who helps oversee $118 billion as chief investment officer in Philadelphia at PNC Wealth Management, said by phone. “As you get into year-end portfolio adjustments, playing on that momentum we’ll likely see the market continue to do well here as opposed to selling off. I think if there are any sort of corrections they’ll be short lived in this environment.”
The S&P 500 has advanced 24 percent in 2013, poised for its best yearly rally in a decade, and is up more than 161 percent from the bear-market low reached in 2009. The benchmark index for U.S. stocks traded at about 16.8 times member company reported earnings at its last record reached Oct. 29, the highest valuation in more than three years.
The broadest equity rally on record will pick up speed through year end and lift the S&P 500 to the biggest annual increase in 16 years, if history is any guide. Shares have risen in the final two months of the year 82 percent of the time since 1928 when the gauge rose at least 10 percent through October, data compiled by S&P and Bloomberg show.
Government data Nov. 7 is forecast by economists to show the U.S. economy grew at a 2 percent annualized rate in the third quarter, compared with a 2.5 percent increase in the previous three months. Economists predict a report the next day will show payrolls climbed by 120,000 in October and the unemployment rate increased to 7.3 percent from 7.2 percent in the previous month, according to a separate survey.
“The U.S. policy outlook is clouded,” Kit Juckes, global strategist at Societe Generale SA in London, wrote in an e-mailed report. “The data will decide what happens next, which puts the focus on third-quarter GDP and October payrolls at the end of the week.”
The Stoxx 600 rose above its highest closing level since May 2008. HSBC Holdings Plc (HSBA) advanced 2.3 percent in London as Europe’s largest bank said third-quarter pretax profit rose 30 percent. PostNL NV surged 7.8 percent after the Dutch postal operator raised its income guidance. Ryanair Holdings Plc (RYA) tumbled 13 percent, dragging travel shares lower, after the budget airline cut its profit forecast.
Thailand’s SET Index fell 2.9 percent, the most since Sept. 23, and the baht weakened against all 16 major peers. The opposition Democrat party is leading a street rally in Bangkok to demonstrate against the government’s plan to pass a blanket amnesty bill for political crimes that occurred after the 2006 military coup. The party claims the law would annul legal cases against former Prime Minister Thaksin Shinawatra.
The MSCI Emerging Markets Index fell a third day, losing 0.1 percent. South Korea’s Kospi Index slipped 0.7 percent as Woori Finance Holdings Co., the nation’s largest financial firm by assets, recorded a jump in bad loans. The Hang Seng China Enterprises Index of mainland Chinese shares in Hong Kong advanced less than 0.1 percent and almost two stocks gained for every one that declined in Shanghai. A government report showed service industries expanded at a faster pace in October.
Brazil’s Ibovespa (IBOV) climbed 0.8 percent, rising the most since Oct. 28 as mining company Vale SA rallied amid signs the economic recovery is gaining traction in China, the company’s top export market. Markets in Russia, Japan and India were closed for holidays.
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