Dow Average Reaches Another Record; Yen Drops, Oil Gains

Stocks rose, with the Dow Jones Industrial Average reaching a third straight record, as U.S. jobless claims dropped. The euro gained as the European Central Bank said the economy may stabilize this year, while Japan’s yen weakened to 95 per dollar for the first time since 2009.

The Dow rose 0.2 percent to 14,329.49 and the Standard & Poor’s 500 Index gained 0.2 percent at 4 p.m. in New York. Brazil’s Bovespa extended its two-day rally to 5.2 percent, the most since July. U.S. Treasuries fell for a fourth day. The euro climbed 1.1 percent to $1.3105, rebounding from its 2013 low, while the yen weakened against all 16 major peers. Spain’s 10-year bond yield fell 11 basis points to 4.89 percent as the nation sold debt. Natural gas jumped more than 3 percent to lead gains in commodities.

The S&P 500 climbed to within 1.4 percent of its 2007 record as jobless claims unexpectedly fell by 7,000 to 340,000 last week, bolstering optimism before tomorrow’s monthly employment report. The ECB kept its benchmark interest rate at a record low today and President Mario Draghi said data suggests the economy will stabilize in the first half of this year.

“This is now two straight days we’ve had a positive reading on the labor market and one of the big concerns in the market has been whether this is jobless prosperity and ergo can it continue?” Uri Landesman, president of New York-based hedge fund Platinum Partners, which manages about $1.2 billion, said by telephone. “I’m still skeptical but the data the last two days would support the fact that it’s not jobless prosperity,” he said. “The data’s been strong and if the bulls are still in control of the market, that should take us through resistance.”

Dow Record

The Dow rose 0.3 percent yesterday to extend an all-time high as an ADP Research Institute report indicated faster-than-forecast growth in jobs and the Federal Reserve’s Beige Book said the economy was growing. Data tomorrow may show U.S. employers added 165,000 people to payrolls in February and the unemployment rate held at 7.9 percent, according to the median economist forecast.

Bank of America Corp. advanced 2.9 percent and JPMorgan Chase & Co. added 1.2 percent to pace gains in financial shares, which led an advance among seven of the 10 main industry groups in the S&P 500. After markets closed, the Fed said 17 of the 18 largest U.S. banks could withstand a deep recession and maintain capital above a regulatory minimum. Only Ally Financial Inc., the auto lender majority-owned by U.S. taxpayers, fell below a 5 percent Tier 1 common ratio, a regulatory minimum and measure of financial strength.

Boeing Jumps

Boeing Co. jumped 2.5 percent after winning orders for 27 jets in the past week. Emirates, the largest operator of the Boeing 777 aircraft, said the company is getting closer to offering a new version that will seek to defend its lead against Airbus SAS in the wide-body market.

Trading volume for S&P 500 stocks was about 11 percent below the 30-day average. Ciena Corp. jumped 17 percent, the most in 18 months, and JDS Uniphase Corp. surged 7.6 percent as Ciena posted quarterly earnings that topped estimates. Time Warner Inc. climbed 2.4 percent after saying it will spin off its magazine business. PetSmart Inc. tumbled 6.6 percent as forecasts for earnings and sales growth missed projections.

The yield on 10-year Treasury notes climbed for a fourth straight day, rising six basis points to 1.995 percent, the highest since Feb. 20. The U.S. Dollar Index, a gauge of the currency against six major peers, slipped 0.4 percent to 82.10 today after reaching its strongest level in more than six months yesterday.

Dollar Correlation

For the first time in four years the dollar is participating in a rally that has sent stocks higher as traders in the $4-trillion-a-day foreign-exchange market bet the world’s largest economy will only strengthen. That’s unusual because the greenback has tended to move in the opposite direction to equities in recent years as investors sought a haven from the global financial crisis, sovereign bailouts in Europe and slower growth.

“This is potentially a clear turning point for the U.S. dollar,” said John Horner, a currency strategist in Sydney at Deutsche Bank AG, the world’s top foreign-exchange trading firm as measured by Greenwich Associates. “We’re now starting to get toward the point where good U.S. data is good for the U.S. dollar and good for U.S. markets, and that’s a quite different scenario to what we’ve seen over the past few years.”

Household Wealth

Household wealth in the U.S. climbed in the fourth quarter to the highest level in five years, propelled by a gain in home prices that is helping repair family finances. Net worth for households and non-profit groups increased by $1.17 trillion from October through December, or 1.8 percent from the previous three months, to $66.1 trillion, the Federal Reserve said today.

Concern about Europe’s debt crisis eased as the Spanish Treasury met its maximum target at a debt auction in Madrid today. Demand for the 2018 note was 2.32 times the amount sold, up from 2.24 last month. The 10-year benchmark yield was 4.917 percent, down from 5.202 percent on Feb. 21, the Bank of Spain said. That’s the lowest yield since November 2010.

The advance in Spanish bonds pushed the 10-year yield to the lowest since January. Portugal’s 10-year yield fell 22 basis points to 5.93 percent, also the least since January, after the nation’s credit rating outlook was raised to stable from negative by S&P, which said European lenders will probably extend support to the government and make the nation’s fiscal tightening “more sustainable.”

U.K. Easing

U.K. 10-year bond yields rose six basis points to 2.01 percent while the pound slipped more than 1 percent against the euro, Swedish krona and Danish krone. The Bank of England’s Monetary Policy Committee led by Governor Mervyn King maintained its target for quantitative easing at 375 billion pounds ($565 billion). The decision was forecast by 29 of 39 economists in a Bloomberg News survey, with the remainder having predicted an expansion of at least 25 billion pounds.

The euro’s advance lifted it from yesterday’s low of $1.2965, the weakest level since Dec. 11. The 17-nation currency appreciated 1.9 percent to 124.33 yen and climbed 1.1 percent to 87.29 British pence. ECB President Mario Draghi stuck to his view that the euro region will gradually recover and said the bank’s monetary policy “will remain accommodative for as long as needed.”

‘Ongoing Contraction’

The euro’s rise is unsustainable as investment dwindles and countries in southern Europe struggle to revive growth and reduce unemployment, said Julian Callow, chief international economist at Barclays Plc. The euro, which traded as strong as $1.3117 today, should be at $1.15, Callow said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene and Michael McKee.

“We’re still in a significant fiscal contraction in the euro zone,” Callow said. “There’s still a lot of deleveraging in the private sector if you look at the figures for bank lending, which is contracting very sharply still in southern Europe. That goes hand in hand with an ongoing contraction in the investment cycle.”

The euro-zone economy will shrink 0.3 percent in 2013, marking the first back-to-back annual contraction since the single currency’s birth in 1999, the European Commission forecast last month. A report today showed the French unemployment rate rose to a 13-year high of 10.6 percent in the fourth quarter as companies eliminated tens of thousands of jobs to cope with a stalled economy.

Aggreko Rally

Aggreko Plc jumped 10 percent in London, the most since 2008 on a closing basis, after the world’s largest provider of mobile power supplies reported higher annual profit and forecast “double digit” average revenue growth over the next five years. Adidas AG climbed 6.6 percent to a record as the second-largest sporting-goods maker forecast an increase in earnings.

Aviva Plc, the U.K.’s second-biggest insurer, plunged 13 percent, the most in almost four years, after cutting its second-half dividend by 44 percent. National Express Group Plc slid 11 percent as the rail and bus operator’s biggest investor, Elliott Advisors, sold a 9.9 percent stake.

Sugar, natural gas and lean hogs jumped more than 2.8 percent to lead gains in 20 of 24 commodities tracked by the S&P GSCI Index. Natural gas surged 3.2 percent to a 13-week high of $3.582 per million British thermal units after government data showed U.S. inventories fell by more than forecast last week as cold weather boosted demand.

The MSCI Asia Pacific Index of shares fell 0.3 percent, retreating from 19-month high reached yesterday, as Chinese and South Korean stocks slumped. The yen weakened after Bank of Japan’s Masaaki Shirakawa’s final meeting amid speculation his successor will expand monetary stimulus and debase the currency.

China Watch

China’s exports probably grew 8.1 percent last month, slowing from January’s 25 percent gain, according to the median estimate of economists surveyed before tomorrow’s trade report. The Shanghai Composite Index slid 1 percent and South Korea’s KOSPI lost 0.8 percent, declining for the first time in three days.

The MSCI Emerging Markets Index slipped 0.2 percent. The Bovespa index advanced 1.6 percent today, adding to yesterday’s 3.6 percent rally, as companies owned by the Brazilian billionaire Eike Batista gained after he signed a financing arrangement with Grupo BTG Pactual. Shares on the Nairobi Securities Exchange jumped 0.9 percent, climbing for a sixth day. The counting of presidential votes continues in Kenya, with partial results showing Uhuru Kenyatta, a deputy prime minister, in the lead.

The South Korean won weakened against all 16 major peers except the yen. The UN Security Council voted unanimously to impose tougher sanctions on North Korea for conducting a nuclear test explosion in violation of its previous prohibition.

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