S&P 500 Rises on U.S. Optimism While Metals Fall on ChinaStephen Kirkland and Nikolaj Gammeltoft
U.S. stocks rose, sending the Standard & Poor’s 500 Index to a record for the eighth time in nine days, amid improving confidence in the world’s largest economy. Industrial metals fell on concern about China’s growth.
The S&P 500 added 1 percent to 1,650.34 at 4 p.m. in New York after the Shanghai Composite Index lost 1.1 percent. Copper slid more than 2 percent to lead commodities lower and oil extended its longest slump of the year. The yen dropped 0.4 percent at a four-year low of 102.26 per dollar. Ten-year Treasury yields erased earlier losses and rose five basis points to 1.97 percent, the highest level since March. The Dollar Index, a gauge of the currency against six major peers, added 0.4 percent to the highest level since July.
U.S. equity index futures erased losses before the open of exchanges in New York as David Tepper, the billionaire who runs Appaloosa Management Inc., told CNBC he’s still bullish and the economy is getting better. A report showed confidence among U.S. small businesses climbed in April to a six-month high as the outlook for the economy and sales brightened.
“We have had a melt-up with a lot of money chasing risk assets and driving stock prices up,” Allan Flader, a senior vice president at RBC Wealth Management, said in a phone interview from Phoenix. His firm oversees $235 billion. “I’m not saying the fundamentals aren’t getting better, the economic numbers are improving. But we just see that reach for yield, combined with the government backing the economy, and that’s helping markets in the near term.”
S&P 500 futures and global stocks fell before the open of exchanges on concern global growth will slow. China’s economy will probably expand 7.6 percent this year, down from an earlier forecast of 7.8 percent, JPMorgan Chase & Co. said in a report, citing weak domestic demand. Data today showed German investor confidence rose less than analysts predicted in May while euro-area industrial output beat forecasts in March.
The S&P 500 has rallied almost 16 percent this year and has extended its rebound from its bear-market low in 2009 to almost 144 percent.
“We think that it’s time to take a little off the table,” New York-based Brian Belski, chief investment strategist at BMO Capital Markets, said in a Bloomberg Television interview today. His year-end forecast for the S&P 500 is 1,575, 3.6 percent below yesterday’s close. “Markets aren’t linear for long, we could see a bit of a pullback,” he said. “This isn’t about just seasonality, it’s about a softening overall.”
Bank of America Corp. and American Express Co. rose at least 2.5 percent to lead the Dow Jones Industrial Average up 123.57 points, or 0.8 percent, to 15,215.25 today. Financial shares climbed 1.7 percent as a group, leading gains among all of the 10 main industries in the S&P 500. Tepper, who led Institutional Investor’s ranking of the top earners in hedge funds last year with $2.2 billion, said Appaloosa still owns stock of Citigroup Inc. and other U.S. banks. Citigroup rallied 2.4 percent.
The U.S. is in the early stages of an economic recovery, Tepper said, citing improvements in the auto and housing industries. The hedge-fund manager, who in January said in a Bloomberg Television interview that the U.S. “is on the verge of an explosion of greatness,” said the nation is going to have a “great manufacturing renaissance” that may start in 2015 or 2016.
“I am definitely bullish,” Tepper said today on the cable television network. “The budget deficit is shrinking massively. Guys who are short, they better have a shovel to get out of the grave.”
Among European stocks, Lonmin Plc sank 7.3 percent as the world’s third-largest platinum producer halted operations at its Marikana mine in South Africa after workers refused to go underground. Jeronimo Martins SGPS SA slid 6 percent after Asteck SA sold half its 10 percent stake in Portugal’s biggest retailer.
Severn Trent Plc, the U.K.’s second-largest publicly traded water company, jumped 14 percent to a record after receiving an approach from a group comprised of Borealis Infrastructure Management Inc., the Kuwait Investment Office and Universities Superannuation Scheme.
The MSCI Emerging Markets Index snapped a three-day slump, rising 0.2 percent as a stronger yen boosted exporters. Benchmark gauges in South Korea, Poland and Turkey added at least 1 percent, and India’s Sensex rebounded from its biggest drop in a year. Brazil’s Ibovespa Index was little changed.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong slid 0.7 percent, extending a 2.1 percent decline yesterday when reports showed industrial production missed estimates and fixed-asset investment unexpectedly slowed last month.
“The April data suggests that domestic demand remains on the weak side, and by extension has also caused the softening in the service sector,” JPMorgan wrote in the report, cutting its growth estimate for China.
Copper for three-month delivery slid 2.3 percent to $7,245 a metric ton on the London Metal Exchange, falling for the first time in three days and leading losses in commodities. West Texas Intermediate crude oil slipped 1 percent to $94.21 a barrel, falling for a fourth straight day in its longest slump of the year, on forecasts that U.S. supplies climbed from an 82-year high.
Money managers are the most bearish on commodities in more than four years as a majority expected a weaker Chinese economy for the first time in 14 months, a Bank of America Corp. survey showed.
A net 29 percent of the fund managers surveyed were underweight the asset class in May as their positions “collapsed” to the lowest level since December 2008. One in four now consider a “hard landing” in China as the biggest risk to their investments. The bank surveyed professional investors who together oversee $517 billion.
“The drop in commodity prices is providing a bit of a lift to equity markets,” said Jim Russell, a senior equity strategist in Cincinnati at U.S. Bank Wealth Management, which oversees about $110 billion in assets. “We think commodity prices will bump along the bottom for a considerable period of time due to sluggishness in Europe and a downgrade of growth prospects in China.”
Spain’s 10-year bond yield was up six basis points at 4.34 percent. The nation sold one-year bills to yield less than 1 percent for the first time since April 2010. The rate on Italy’s 10-year note rose four basis points to 4.01 percent.
The Netherlands sold five-year notes at a record-low yield of 0.611 percent.
Australia’s dollar fell to an 11-month low as the government’s forecast of slower growth fanned speculation the Reserve Bank will cut borrowing costs to support the economy. The Aussie weakened 0.6 percent to 98.93 U.S. cents.