U.S. Stocks, Dollar Rise as Data Fuel Economic Confidence

U.S. stocks rebounded from yesterday’s drop and the Dollar Index rose to the highest level since July 2010 as better-than-estimated economic data fueled speculation the Federal Reserve will consider scaling back stimulus. Gold extended its longest slump in four years.

The Standard & Poor’s 500 Index climbed 1 percent to a record 1,667.47 at 4 p.m. in New York and the Stoxx Europe 600 Index closed 0.2 percent higher. The gauge of the U.S. currency against six major trade partners gained 0.8 percent to 84.28. The rand sank to its weakest level since 2011 and the Aussie slid to the lowest in almost a year. Gold for immediate delivery fell for a seventh day, while 10-year Treasury yields rose seven basis points to 1.95 percent.

The S&P 500 extended gains today after reports showed consumer sentiment improved and the Conference Board’s index of leading indicators rebounded in April. The U.S. central bank may reduce its $85 billion in monthly bond-buying as early as this summer amid signs the economy is gaining strength, Fed Bank of San Francisco President John Williams said.

“Today’s data was good, an almost mirror image of yesterday’s in terms of quality,” Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $380 billion, said by phone. “It’s been an unsteady recovery, but the trend is positive. The glass half-full view is that the Fed will begin to decelerate quantitative easing only when they see the economy improving enough.”

Options Expire

Options contracts on stocks, exchange-traded funds and indexes expire today, leading investors to adjust their holdings of some securities. Trading of S&P 500 stocks was in line with the 30-day average at this time of day.

The Fed’s stimulus efforts have helped fuel a rally in stocks that sent the S&P 500 up 17 percent so far this year and 146 percent from its bear-market low in 2009. The rally pushed 193 stocks in the S&P 500, or 39 percent of the gauge, to their highest levels in at least 52 weeks on May 15, the most in Bloomberg data going back to 1993.

Boeing Co., JPMorgan Chase & Co., Microsoft Corp. and United Technologies Corp. added more than 2 percent to lead the Dow Jones Industrial Average’s gain today. Northrop Grumman Corp. climbed 4 percent after increasing its share-buyback program by $4 billion. J.C. Penney Co. slid 4.2 percent after its first-quarter net loss widened.

Economy Watch

The index of U.S. leading indicators climbed in April, a rebound from March that suggests the world’s largest economy may be poised for further expansion. The Conference Board’s gauge of the outlook for the next three to six months climbed 0.6 percent in April after falling in March. The median forecast of economists surveyed by Bloomberg called for a 0.2 percent increase.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 83.7 in May from 76.4 the prior month, a report today showed. The median forecast in a survey was for a gain to 77.9. Forecasts ranged from 74 to 82.5.

Bank of America Corp. equity strategist Savita Subramanian lowered her 2013 forecast for S&P 500 earnings-per-share by $1 to $109, citing weakness in “globally-exposed sectors such as tech and industrials” that is overshadowing brighter prospects for U.S.-focused groups such as financials. The strategist introduced a 2014 forecast of $115 a share, which implies almost 6 percent growth and is lower than a projection of $123 derived from analysts covering individual companies.

‘Limited Scope’

“While we expect global economic growth to accelerate in 2014, growth will continue to be hampered by global fiscal austerity with limited scope for significant incremental monetary easing,” she wrote in a report to clients. “And given how lean corporate cost structures have already been cut, we believe it will be difficult for corporations to generate further earnings growth through further margin expansion. As such, we expect the S&P 500 to maintain the current growth trajectory” of 5 percent to 6 percent annually.

The dollar gained against all 16 of its major peers. The euro slipped 0.4 percent to $1.2831 and the yen weakened 1 percent to 103.29 per dollar, the weakest level since October 2008.

“Part of the reason for the current favorable dollar sentiment is the expectations of a change in monetary stance later this year,” Derek Halpenny, European head of global-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in a report. The Fed’s Williams “is viewed as dovish” so his comments “carried more weight,” he wrote.

Aussie Falls

The Australian dollar declined as much as 1 percent to 97.11 U.S. cents, the weakest level since June. It has slid 2.9 percent over the past five days. New Zealand’s currency dropped 1.1 percent to 80.67 U.S. cents, the lowest level since November.

The rand fell for a seventh day to extend its longest losing streak against the dollar in a year on concern that renewed labor unrest and falling commodity prices will weigh on South Africa’s economy. The currency depreciated as much as 1.3 percent to 9.4413 per dollar, falling for a seventh straight day.

The Stoxx 60 advanced 1.2 percent in five days, a fourth straight week of gains, and reached its highest level in almost five years. FLSmidth & Co. A/S, Europe’s biggest maker of cement production lines, slid 9.7 percent today, the most since 2011, as earnings missed estimates. Coca-Cola HBC AG lost 5.3 percent as Credit Suisse Group AG managed the sale of a 1.7 percent stake in the drinks bottler.

Carmakers Climb

PSA Peugeot Citroen surged 10 percent and Renault SA advanced more than 3.5 percent in Paris as European car sales rose for the first time in 19 months in April amid signs that governments may take measures to stem a contraction in the euro-area economy.

The MSCI Emerging Markets Index lost 0.2 percent, heading for its first weekly decline in a month as gauges in Brazil, Taiwan, the Philippines and Czech Republic declined at least 0.3 percent. Russia’s Micex index climbed 2 percent as oil rebounded. The Shanghai Composite Index jumped 1.4 percent on speculation the government won’t impose more real-estate curbs as the economy slows. Markets were closed in Hong Kong and South Korea.

Spanish and Italian bonds rose for a third day after European governments issued almost 37 billion euros of bonds and notes this week. Italy’s 10-year yield dropped eight basis points to 3.90 percent, while Spain’s decreased 10 basis points to 4.21 percent.

Gold dropped 1.6 percent to $1,364.70 an ounce and silver slid 1.4 percent while coffee plunged 2.1 percent for the biggest declines in the S&P GSCI Index, while natural gas jumped 3.1 percent corn rallied 1.7 percent to lead the commodities gauge higher. West Texas Intermediate oil advanced 0.9 percent to $96.02 a barrel.

The surge in natural gas futures came as the U.S. conditionally approved a Texas liquefied natural gas project. Gas jumped as much as 4.2 percent. The Freeport LNG export project received only the second approval from the Energy Department to export gas to countries that don’t have free-trade agreements with the U.S. The facility would be able to export 1.4 billion cubic feet a day.

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