U.S. Stocks Snap Three-Day Drop as Commodities StrengthenStephen Kirkland and Sarah Pringle
U.S. and European stocks rose for the first time in four days and commodities gained as policy makers weighed bailout options for Cyprus and the Federal Reserve said it will keep up its bond buying.
The Standard & Poor’s 500 Index increased 0.7 percent at 4 p.m. in New York and the Stoxx Europe 600 Index added 0.3 percent. The euro strengthened 0.4 percent to $1.2933 and Italy’s 10-year bond yield fell nine basis points to 4.64 percent. Ten-year Treasury yields rose six basis points to 1.96 percent, climbing from a two-week low reached yesterday. Brent crude gained 1 percent and copper jumped 1.2 percent.
Investors speculated that the European Central Bank will continue to support the country’s banks until next week after lawmakers in the Mediterranean nation rejected an unprecedented levy on bank deposits. The U.S. central bank is pressing on with open-ended purchases of Treasury and mortgage securities to boost the pace of growth and heal a labor market still scarred by the deepest recession since the Great Depression.
“The Fed seems to be confirming what the underlying fundamentals are and market participants are not surprised either way,” Greg Woodard, a portfolio strategist at Manning & Napier in Fairport, New York, said in a phone interview. His firm had $45.2 billion under management at the end of 2012. “The market is anticipating them to have some kind of resolution on Cyprus.”
The Federal Open Market Committee, at the conclusion of a two-day meeting in Washington, left unchanged its statement that it plans to hold its target interest rate near zero as long as unemployment remains above 6.5 percent and inflation is projected to be no more than 2.5 percent.
Policy makers lowered their expectations for the unemployment rate at the end of the year to a range of 7.3 percent to 7.5 percent, from a previous forecast of 7.4 percent to 7.7 percent. The economy will expand 2.3 percent to 2.8 percent this year, they estimate, compared with their earlier forecast of 2.3 percent to 3 percent growth.
“Labor market conditions have shown signs of improvement in recent months but the unemployment rate remains elevated,” the FOMC said. Recent data suggest “a return to moderate economic growth following a pause late last year.”
In the U.S., Adobe Systems Inc. climbed 4.2 percent after the software maker reported fiscal first-quarter sales and profit that exceeded analysts’ estimates. Lennar Corp. gained 4.8 percent after posting first-quarter earnings that beat projections. FedEx Corp. slumped 6.9 percent as it lowered its 2013 earnings forecast amid a widening customer shift to cheaper overseas shipments.
Oracle Corp. slumped 7 percent after the close of regular trading as it reported sales and profit that missed analysts’ estimates.
Almost two shares advanced for every one that declined in the Stoxx 600, helping it rebound from the longest losing streak in a month. National Bank of Greece SA and Italy’s Banca Popolare di Milano Scarl led a rally in banks, advancing more than 4 percent. Metro AG dropped 1.6 percent as Germany’s biggest retailer forecast a decline in operating profit.
The yield on Spain’s 10-year note declined seven basis points to 4.98 percent. German bonds dropped for the first time in five days on reduced demand for Europe’s safest fixed-income assets. The 10-year bund yield rose four basis points to 1.39 percent after falling to 1.34 percent yesterday, the lowest since Jan. 2.
The euro advanced 1.3 percent versus the yen. It snapped a two-day drop against the dollar to trade 0.4 percent higher at $1.2933.
Investors speculated that the European Central Bank will continue to support the country’s banks until next week. Chancellor Angela Merkel, saying she “regrets” the Cypriot parliament’s decision, signaled a willingness to engage with Cyprus as long as its banks contribute to a bailout.
Cyprus “has some symbolism impact on Europe, but it’s not a really major economic issue,” Laurence D. Fink, the chief executive officer of BlackRock Inc., the world’s largest asset manager with about $3.8 trillion in assets, said in a Bloomberg Television interview in Hong Kong today. “It does remind us of the frailty of Europe. It does remind us that the European fix will be multiple years.”
The pound advanced against the dollar as Chancellor of the Exchequer George Osborne said the government will keep the Bank of England’s 2 percent inflation target, damping speculation he would ease the goal to boost the economy.
Copper rose in New York from the lowest price since August after Morgan Stanley said demand is reviving in China, the world’s biggest consumer of the metal. The metal advanced 1.2 percent to $3.4465 a pound.
The MSCI Emerging Market Index added 0.1 percent, snapping a seven-day slump, the longest losing streak in four months. The Bovespa index sank 0.6 percent to a two-week low as Cia. Energetica de Minas Gerais led a plunge by electric power companies on concern the Brazilian utility regulator’s rates review may curb industry profits.
China’s yuan rose to a 19-year high against the dollar after the central bank set the currency’s reference rate at the strongest level since Jan. 15 amid U.S. Treasury Secretary Jacob L. Lew’s visit to Beijing for talks.
The yuan appreciated to 6.2113, the strongest level since the government unified the official and market rates at the end of 1993. China limits the currency’s movement to 1 percent on either side of the daily fixing.
The Kospi Index declined 1 percent to the lowest in more than a month. South Korea is investigating the simultaneous shutdown of computer networks at several major broadcasters and banks. The won weakened 0.5 percent after the government said it will consider steps to curb capital flows if needed.