U.S. Stocks Rise on House Data; Crimea Boosts Treasuries
U.S. stocks climbed a second day as housing data bolstered confidence in the economy with the Federal Reserve meeting on policy. Treasuries advanced and the yen strengthened amid ongoing turmoil over the Crimea.
The Standard & Poor’s 500 Index (SPX) rose 0.7 percent to 1,872.25, within six points of a record close. Most Asian index futures climbed after Russia’s Micex Index capped the biggest two-day jump in almost four years and European stocks rose. Ten-year Treasury yields fell two basis points to 2.67 percent by 5:37 p.m. in New York and the dollar weakened 0.3 percent against the yen amid reports of clashes in Crimea. Gold fell 1 percent and oil rallied, while nickel entered a bull market.
U.S. and European leaders condemned Russia’s push to annex Crimea from Ukraine and promised further sanctions as soon as this week. Russian President Vladimir Putin said his country didn’t intend to further divide Ukraine. The Fed will press on with cuts to stimulus and switch to qualitative guidance for assessing interest rates, according to economists surveyed before the central bank’s two-day meeting. U.S. housing starts held steady in February while building permits climbed.
“We’ve got a more congenial Russian message this morning and we got better economic reports here in the States,” John Augustine, chief market strategist at Cincinnati-based Fifth Third Bancorp, said in a phone interview. His firm oversees $28.2 billion. “The building permits report was very bullish for the spring and summer housing season. Today, we move back to better economic reports and focusing on the Fed.”
Russia was slapped with sanctions from the U.S. and European Union after supporting Crimea’s bid to join Russia, with the region voting in favor of becoming a part of its bigger neighbor in a March 16 referendum. Crimea’s regional parliament called the plebiscite after Ukrainian President Viktor Yanukovych fled the country following protests.
British Prime Minister David Cameron called Russia’s actions over the Black Sea peninsula a breach of international law that sent “a chilling message across the continent of Europe.” U.S. Vice President Joe Biden, in Poland on a trip to meet regional allies, predicted “additional sanctions” over what he called “a brazen military incursion.”
In a speech to lawmakers, Putin said Russia doesn’t want to “split up Ukraine,” saying “ we don’t need that.”
“Don’t believe those who scare you with Russia, who yell that Crimea will be followed by other regions,” he said to parliament in Moscow.
Ukraine’s government said the conflict has entered a military phase. A soldier was killed when unidentified masked gunmen stormed a military installation in Crimea, Vladyslav Seleznyov, a spokesman for Ukraine’s defense ministry in the region, said by phone.
While U.S. and European stocks climbed after Putin’s comments, U.S. Treasury yields fell and the yen strengthened as speculation the situation remains volatile drove demand for haven assets. Benchmark 10-year yields fell for the first time in three days.
Investors “don’t know how bad the sanctions are going to be, or if it escalates into a military buildup from the West,” said Michael Franzese, senior vice president of fixed-income trading at ED&F Man Capital Markets in New York. “That’s where the fear is.”
The S&P 500 rallied 1 percent yesterday, rebounding from its worst week since January, as a measure of U.S. industrial production signaled faster growth that was forecast. The index is close to the record 1,878.04 reached March 7.
Economic data “was sort of little-changed to us, but at least it wasn’t a lot worse,” Cam Albright, director of asset allocation at Wilmington Trust Investment Advisors, said in a phone interview. His firm oversees about $82 billion. “People have been looking at a lot of negatively influenced numbers and thinking we may starting to get a little past that.”
Housing starts in the U.S. were little changed in February after declining less than previously estimated a month earlier, data showed today, indicating the home-building industry is stabilizing after bad winter weather curbed construction. Permits filed for future building projects increased 7.7 percent to a pace of 1.02 million in February, the most since October amid demand for apartment buildings.
Another report showed the cost of living in the U.S. was little changed in February, showing inflation is making scant progress toward the Fed’s goal with policy makers to release a statement on monetary policy at the end of their meeting tomorrow.
Fed officials have said they will probably hold the bank’s target interest rate near zero “well past the time” that unemployment falls below 6.5 percent, “especially if projected inflation” remains below its longer-run goal of 2 percent.
The Fed Open Market Committee will further scale back its stimulatory bond-buying program at the meeting, reducing purchases by $10 billion for the third time, according to 54 economists surveyed by Bloomberg March 14-17. Policy makers will scrap a 6.5 percent unemployment-rate target in favor of a range of economic indicators, 76 percent of the economists said.
An S&P index of homebuilders rallied 1.5 percent on the housing report. Microsoft Corp. jumped to the highest level since 2000 on company plans to debut a version of Office for Apple Inc.’s iPad. Hewlett-Packard Co. added 3.7 percent after Barclays Plc lifted its rating on shares of the computer maker.
Oracle Corp. (ORCL) shares fell more than 4 percent in after-hours trading after reporting fiscal third-quarter sales and profit that fell short of analysts’ estimates. The software maker, facing stiffer competition from Salesforce Inc. and rivals selling Internet-based programs, predicted fourth-quarter adjusted earnings-per-share of 92 cents to 99 cents, compared with the median analyst projection of 96 cents.
Futures on stock indexes in Australia, South Korea and Hong Kong rose at least 0.3 percent in recent trading, while contracts on Japan’s Nikkei 225 Stock Average lost 0.4 percent on the Chicago Mercantile Exchange. The MSCI Asia Pacific Index climbed 0.7 percent today, rebounding from a five-week low.
The Stoxx Europe 600 Index advanced 0.6 percent, extending its two-day gain to 1.8 percent. The rally followed the index’s biggest weekly loss since January.
Kuoni Reisen Holding AG climbed 8.2 percent after Switzerland’s biggest travel company posted 2013 profit that exceeded estimates. Scania AB (SCVB), a Swedish truckmaker, declined 2.1 percent after a board committee recommended rejecting Volkswagen AG’s takeover offer. Cairn Energy Plc lost 14 percent after the U.K. oil explorer said it is suspending a buyback program.
The Micex Index (INDEXCF) added 4.1 percent in Moscow. The gauge of Russian stocks has climbed 8 percent over two days, the most since May 2010. The Ukrainian Equities Index jumped 2.4 percent. The MSCI Emerging Markets Index rose a second day, increasing 1 percent to the highest level since March 11.
The yen advanced 0.3 percent to 101.44 per dollar and gained 0.2 percent to 141.35 per euro. The 18-nation European currency rose 0.1 percent to $1.3934.
Gold futures fell the most in two weeks on prospects continued cuts to Fed stimulus will curb demand for the precious metal as a store of wealth. Futures dropped 1 percent to settle at $1,359 an ounce. Gold is up 13 percent this year as the turmoil in Ukraine and signs of slowing economic growth in China increased demand for investments viewed as being safe havens. Silver futures dropped 1.9 percent to $20.86 an ounce.
Nickel prices climbed on speculation Russian supplies will be disrupted at a time when some shipments of the metal are already banned in Indonesia. Nickel for delivery in three months closed at $16,190 a ton in London, the highest price since April 11. Prices have rallied 22 percent from the $13,285 a ton level reached Nov. 27, with a gain of 20 percent from a recent low constitution the common definition of a bull market.
West Texas Intermediate crude oil jumped 1.7 percent, the most in two weeks, to $99.70 a barrel, after Enterprise Products Partners LP said it would more than double the capacity of its Seaway pipeline as early as May. The expanded line will be able to move more than 850,000 barrels a day of oil to Houston from Cushing, Oklahoma, the futures’ delivery point.