Stocks Extend Four-Day Rally While Dollar, Oil Retreat

U.S. stocks extended a four-day rally as retailers gained after reporting improving sales and jobless claims dropped more than forecast. The dollar weakened against most major peers as investors bet global central-bank stimulus will bolster demand for higher-yielding assets.

The Standard & Poor’s 500 Index added 0.4 percent to 1,593.37 at 4 p.m. in New York and extended this week’s gain to 2.6 percent, its best advance since the beginning of the year. The U.S. currency was lower against 14 of 16 major peers and the Dollar Index dropped 0.3 percent to trade near the lowest level in more than a month. Crude oil slid more than 1 percent to help lead commodities lower as the International Energy Agency trimmed its forecast for global demand.

Ross Stores Inc. and Limited Brands Inc. jumped more than 4 percent to pace a rally in retailers as the S&P 500 climbed to an intraday record for a second day. U.S. jobless claims declined by 42,000 to 346,000 last week, unwinding a surge caused by the Easter holiday and spring break at schools. The fewest number of Americans in five years rated the economy as poor, according to the Bloomberg Weekly Consumer Comfort Index.

“You really have a lack of reason to sell this market,” Bill Schultz, chief investment officer who oversees about $1.1 billion at McQueen Ball & Associates in Bethlehem, Pennsylvania, said by phone. “A lot of investors may have missed part of this rally and they feel compelled to jump back into this market.”

Record Rally

The S&P 500 climbed 1.2 percent yesterday to a record as a report showed China’s imports grew faster than economists forecast in March and investors speculated earnings will beat estimates. The gauge has more than doubled from its 12-year low in March 2009, helped by the Federal Reserve’s unprecedented bond purchases and three straight years of profit growth.

Equities have risen in 2013 as individual investors made deposits with money managers and professional speculators closed bearish bets. A gauge of hedge-fund bullishness measuring how much they’re betting on rising shares reached 51.6 percent yesterday, up from 47.3 at the end of 2012, according to data compiled by International Strategy & Investment Group.

Since the bull market began four years ago, the S&P 500 has gained 1.7 percent on average in the first two weeks after Alcoa Inc. marked the start of the quarterly earnings season, according to data compiled by Bloomberg. Analysts predict earnings fell 1.8 percent in the first three months of the year, according to a Bloomberg survey on April 5. The projection compared with an estimate for a 1.9 percent drop seen on April 1, marking the first improvement in the survey this year. Earnings have beaten estimates every quarter since 2009.

Earnings Season

The earnings season picks up tomorrow when JPMorgan Chase & Co. and Wells Fargo & Co., the biggest U.S. banks by market value, report results.

Retailers in the S&P 500 advanced 1.2 percent as a group for the second-biggest gain among 24 industries today. Rite Aid Corp. jumped 18 percent to $2.12, the highest closing level in more than three years, after the drugstore chain reported its first annual profit since 2007. Pfizer Inc., Travelers Cos. and Verizon Communications Inc. rallied at least 1.3 percent to lead gains in the Dow Jones Industrial Average, which also set another record.

Computer and software makers slumped, sending S&P 500 technology shares to the only decline among 10 groups, after IDC said personal-computer shipments in the first quarter plunged 14 percent, the most since at least 1994, and Goldman Sachs Group Inc. downgraded Microsoft Corp. shares. Microsoft and Hewlett-Packard Co. lost at least 4.4 percent.

Ashmore Assets

About three stocks gained for every one that declined in the Stoxx 600. Ashmore Group Plc, a U.K. fund manager that invests in emerging markets, rallied 13 percent today, the most in four years, as assets under management increased. Man Group Plc, the world’s largest publicly traded hedge-fund manager, jumped 6.8 percent after regulators cut the amount of capital it must hold.

Evraz Plc plunged 11 percent in London trading, the largest drop since 2011, as Russia’s biggest steelmaker said it will pay no final dividend for 2012 after a deterioration in performance in the second half.

In European bond markets, rates on U.K. and French 10-year debt declined about two basis points, wile Spanish and Italian yields rose. Italy’s borrowing costs dropped at an auction of 7.17 billion euros ($9.38 billion) of bonds today as monetary easing by Japan prompted investors to search for better returns.

Italy sold 4 billion euros of a new 2016 bond at 2.29 percent, down from the 2.48 percent on similar-maturity debt March 13. Investors bid 1.4 times the amount of the three-year bond offered, up from 1.28 times last month.

Yield Forecasts

Thirty-year U.S. bonds were little changed, with yields fluctuating around 3 percent. Economists are cutting their forecasts for how much yields will rise this year as the world’s largest economy shows signs of slowing. Ten-year yields will be 2.25 percent by Dec. 31, based on the average forecast among banks and securities companies surveyed by Bloomberg News from April 5 to April 9. The projection dropped from this year’s high of 2.32 percent in February, based on the monthly surveys.

The U.S. Treasury auctioned $13 billion in 30-year bonds today at a lower-than-forecast yield. The notes drew a yield of 2.998 percent, compared with a forecast of 3.001 percent in a Bloomberg News survey of seven of the Federal Reserve’s primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.49, versus a 2.59 average for the previous 10 sales.

Sweden’s krona strengthened against all 16 major peers, gaining 0.7 percent against the dollar, after a report showed consumer prices were unchanged on an annual basis in March.

Japan Stimulus

The yen erased earlier gains versus the dollar to resume trading near the lowest level in more than four years and the brink of 100 per dollar, after official data showed Japanese investors sold foreign bonds last week. Bank of Japan chief Haruhiko Kuroda this week reiterated a pledge to do what’s needed to meet an inflation target of 2 percent in two years, bolstering speculation that central banks will keep markets awash in cash to bolster economies.

The BOJ said last week it will buy 7.5 trillion yen ($75 billion) of bonds a month and double its monetary base in two years, driving the 10-year yields in Asia’s second-biggest economy to as little as 0.33 percent.

New Zealand

The New Zealand dollar climbed above 86 U.S. cents for the first time in 1 1/2 years after reports showed the nation’s manufacturing industry expanded last month and a gauge of home prices advanced to a record.

Crude oil fell for the first time in four days, losing 1.2 percent to $93.51 a barrel, as the IEA predicted the weakest fuel use in Europe since the 1980s. U.S. supply increased to a 22-year high last week, the Energy Information Administration said yesterday. Brent oil’s premium to West Texas Intermediate shrank below $11 as the European benchmark slumped more than WTI.

Heating oil and gasoline also dropped at least 0.9 percent to lead the S&P GSCI Index down 0.7 percent, even as 13 of its 24 commodities advanced. Natural gas rose 1.3 percent to a 20-month high of $4.139 per million British thermal units after Energy Department data showed supplies dropped more than forecast last week.

Emerging Markets

The MSCI Emerging Markets Index rose for a third day, advancing 0.5 percent. Turkey’s benchmark gauge climbed 2.1 percent after Moody’s Investors Service said a peace agreement with Kurdish militants would boost investment and enhance the country’s creditworthiness. Benchmark gauges in Taiwan, the Czech Republic, Poland and the United Arab Emirates also gained more than 1 percent.

Brazil’s Bovespa sank 1.4 percent, the biggest drop among the world’s major equity gauges, as a report showed retail sales unexpectedly dropped in February. Lojas Americanas SA led losses among retailers, sinking the most since August. Oil services provider Lupatech SA tumbled after missing a $6.79 million bond payment. OGX Petroleo & Gas Participacoes SA, the crude oil producer controlled by billionaire Eike Batista, declined to a record low.

JPMorgan Asset Management is preparing for a rebound in emerging-market equities in the second half of this year spurred by improved earnings.

Buying Carmakers

JPMorgan Asset is buying Korean automaker shares hurt by investor concern that a weaker yen will limit their ability to compete against Japanese exporters, Richard Titherington, chief investment officer and head of emerging markets in London, said in an interview. The company favors consumer discretionary stocks with “very low valuations” and has its biggest overweight position in China, he said.

The won climbed 0.5 percent against the dollar and the Kospi index of stocks gained 0.7 percent. The Bank of Korea held the benchmark seven-day repurchase rate at 2.75 percent today. Eleven of 20 economists surveyed by Bloomberg News forecast a reduction as tensions with North Korea threaten to damp business and consumer sentiment.

Borrowing costs in emerging markets have sank to record lows as Japan’s unprecedented monetary easing spurs demand for higher-yielding assets.

The average yield on developing-nation local-currency debt tracked by JPMorgan Chase & Co. has fallen 16 basis points since April 3, the day before the Bank of Japan expanded its asset-purchase program, to an all-time low of 5.39 percent yesterday. Ten-year government yields dropped to levels not seen before in Mexico, the Czech Republic, Poland and South Africa this week, while comparable rates in South Korea and the Philippines touched all-time lows in the past month.

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