S&P 500 Extends Record as Treasuries Drop on Economy Data
The Standard & Poor’s 500 Index (SPX) rose to another record and Treasuries fell amid improving U.S. consumer confidence and speculation the Federal Reserve will continue to support the economy. The euro strengthened after data showed faster-than-estimated inflation.
The S&P 500 gained 0.3 percent to 1,859.45 at 4 p.m. in New York. Yields on 10-year Treasuries increased one basis point to 2.65 percent, climbing for the first time in four days. The Stoxx Europe 600 Index rose 0.2 percent, reversing an earlier drop of 0.5 percent. Europe’s shared currency jumped 0.7 percent to $1.3800. Natural gas rallied 2.2 percent and gold fell.
U.S. data showed consumer confidence improved in February from a month earlier while gross domestic product expanded at a slower pace than initially estimated in the fourth quarter. Consumer prices in Europe grew an annual 0.8 percent, more than the 0.7 percent median forecast in a Bloomberg survey, easing pressure on the European Central Bank to take action next week to foster the fragile economic recovery. Ukraine’s a acting president said Russia invaded the southern region of Crimea as gunmen seized airports and other facilities on the peninsula.
“The markets are trying to gauge if the economic slowdown is weather-related or actually real and systemic,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $150 billion of assets, said by phone. “The vote amongst market speculators is that this is a transitory effect. There’s also the factor that Janet Yellen strongly indicated yesterday that the Fed is by no means stuck to a firm taper, even if the economy decelerates its growth trajectory.”
The S&P 500 gained 0.5 percent to a record yesterday after Fed Chair Janet Yellen said the central bank may change its strategy for reducing asset purchases should the economy weaken. The gauge has climbed 4.3 percent this month, the most since October, as investors speculated that severe winter weather explains the weakness in reports such as housing and hiring.
U.S. equities are set to enter the sixth year of a bull market that started March 9, 2009. Three rounds of stimulus have helped push the S&P 500 up 175 percent from a 12-year low.
Fed policy makers trimmed their bond purchases by $10 billion for a second time in January, to a $65 billion monthly pace. The Federal Open Market Committee next meets March 18-19.
Fed Bank of Philadelphia President Charles Plosser, who votes on policy this year, said the Fed should press on with plans to trim its bond purchases with the economy likely to grow about 3 percent this year.
“I actually am optimistic about the longer-term growth of the economy,” Plosser said today in an interview on Bloomberg Television’s “Surveillance” with Tom Keene. “What we’re seeing is that many of the things that held us back such as the deleveraging of household balance sheets are starting to wane.”
Among today’s economic reports, the Thomson Reuters/University of Michigan final index of sentiment rose to 81.6 this month from 81.2 in January, indicating more consumers grew optimistic about the outlook for the economy.
Gross domestic product grew at a 2.4 percent annualized rate from October through December, compared with the 3.2 percent gain issued last month, revised figures showed. The median forecast of 85 economists surveyed by Bloomberg called for a 2.5 percent increase. Another report showed contracts to purchase previously owned U.S. homes rose less than forecast in January, adding to signs housing was weakening in early 2014.
Treasuries fell for the first time in four days as the consumer confidence data reduced the refuge appeal of U.S. government debt. Benchmark 10-year yields rose two basis points to 2.65 percent, after declining to the lowest level since Feb. 7 yesterday.
Equities briefly erased gains and Treasuries pared losses after Turchynov said Russia has invaded Crimea and is trying to provoke a conflict similar to the 2008 war with Georgia over a breakaway region.
“Any time there’s potential for global unrest or military conflict it causes uncertainty for a lot of things,” Joe Bell, senior equity analyst at Cincinnati-based Schaeffer’s Investment Research Inc., said by phone. “Markets greet uncertainty with selling, especially entering a weekend.”
Ukraine’s hryvnia rallied 7 percent to 9.95 per dollar, paring this month slide to 15 percent. Ukraine’s deposed ex-President Viktor Yanukovych earlier said he’s still the nation’s rightful leader and urged Russia to refrain from military intervention in Crimea.
The new government said it had enough reserves to pay all creditors and that it stands ready to meet all demands for aid while the central bank limited access to foreign-currency deposits.
The euro gained against 14 of its 16 main peers, climbing 0.6 percent versus the yen, as investors welcomed the European inflation data as a sign that the economic situation in the currency bloc is stabilizing. Sweden’s krona rose at least 0.7 percent against all of its 16 major peers, as gross domestic product rose 1.7 percent from the third quarter, more than double the 0.6 percent seen in a Bloomberg survey of 14 analysts.
The Stoxx 600 ended the month with a 4.8 percent gain, the most since July. The gauge is at the highest level since 2007.
The MSCI Emerging Markets Index rose 0.3 percent, advancing 3.2 percent in February, the first monthly gain since October. China’s yuan fell the most on record on speculation the central bank will widen the currency’s trading band.
U.S. natural gas rose 2.2 percent, climbing for the first time in four days, on forecasts for below-normal March temperatures that would erode stockpiles of the heating fuel. Futures tumbled 25 percent this week, capping the biggest slump since 1996. Crude oil increased 0.2 percent to $102.59 a barrel, its 12th straight settlement above $100.
Gold declined 0.8 percent, trimming its gain this year to 9.9 percent, as some traders booked profits after prices climbed to a 17-week high and amid speculation a weaker yuan may hurt demand from China.
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