U.S. Stocks Gain, Treasuries Fall on Data as Yen Weakens

U.S. stocks and the dollar rose while Treasuries slid as retail sales data reinforced signals the economy is expanding moderately. European shares climbed to the highest level since May as German investor confidence topped estimates, while gold weakened.

The Standard & Poor’s 500 Index added 0.3 percent at 4 p.m. in New York, erasing an earlier loss, while the Stoxx Europe 600 Index advanced 0.6 percent. Apple Inc. rallied to the highest since Jan. 23 after billionaire investor Carl Icahn disclosed a “large position” in the stock. The yield on 10-year Treasuries rose 10 basis points to 2.72 percent. The Bloomberg U.S. Dollar Index added 0.5 percent and the yen fell versus all of its 16 major peers. Gold lost 1 percent, halting a four-session rally.

U.S. retail sales rose for a fourth consecutive month in July, showing American households are regaining momentum as employment climbs. The ZEW Center for European Economic Research’s index of investor and analyst expectations rose to 42 in August, more than the 39.9 median forecast of economists in a Bloomberg survey. Japanese Prime Minister Shinzo Abe is mulling a tax cut for companies, the Nikkei newspaper reported, citing unidentified government officials.

“The general tenor of economic news has been somewhat positive and so perhaps there are some bargain hunters who are coming into the market after some days of correction,” John Carey, a fund manager at Boston-based Pioneer Investment Management Inc., said by phone. His firm oversees $211.5 billion. “I don’t know that we’re going to have a roaring recovery anytime soon, but the economy does seem to be advancing, slowly but certainly advancing, and that I think has sunk in finally.”

The S&P 500 erased earlier losses of as much as 0.4 percent, extending to a ninth day a trend where it reached its lowest point before noon, data compiled by Bloomberg show. The gauge rallied an average of 0.45 percent from its morning low to the close during the eight days through yesterday.

Financial Stocks

Hewlett-Packard Co. rose 2.1 percent after being added to Citigroup Inc.’s focus list. Bank of America Corp. and Citigroup jumped more than 0.7 percent after analyst Dick Bove said the stocks would double. D.R. Horton Inc. and PulteGroup Inc. dropped more than 1.5 percent as homebuilders slid amid rising interest rates. U.S. Airways Group Inc. sank 13 percent after the Justice Department recommended blocking a planned merger with American Airlines.

Apple rallied 4.8 percent, giving technology shares the biggest gain among 10 groups in the S&P 500. Icahn said in a Twitter post that Apple shares are extremely undervalued and the company should conduct a large buyback. The company will unveil a new iPhone at a Sept. 10 event, according to a person familiar with its plans.

Fed Stimulus

The S&P 500 fell 0.1 yesterday, its fifth drop in the past six days after closing at a record on Aug. 2, amid growing speculation the Federal Reserve will pare bond purchases this year as the economy strengthens. Fed officials have been scrutinizing data to determine whether growth is strong enough to curtail stimulus.

Charles Evans, Sandra Pianalto and Richard Fisher, regional Fed presidents in Chicago, Cleveland and Dallas, said last week that policy makers may be closer to tapering debt buying.

Fed Bank of Atlanta President Dennis Lockhart, who has backed the Fed’s $85 billion in monthly bond purchases, said today that policy makers may start to slow buying at any of their next few meetings amid “uneven performance” by the economy.

Retail Sales

The 0.2 percent increase in U.S. retail sales last month followed a 0.6 percent gain in June that was larger than previously reported, according to Commerce Department figures issued today in Washington. The median forecast of 81 economists surveyed by Bloomberg called for a 0.3 percent advance.

Treasuries dropped the most in more than a week as the retail sales report added to speculation the economy is strengthening enough for the Fed to reduce its bond-buying program.

The S&P 500 will climb 8 percent to 1,825 in the next 12 months as economic growth gains momentum, according to Goldman Sachs Group Inc. David Kostin, the bank’s chief U.S. equity strategist, recommends buying shares of companies that generate most of their revenue domestically.

‘Better Economy’

“The real issue to focus on is that rising interest rates are a reflection of a better economy,” Kostin said in a Bloomberg Television interview from New York. “The best strategy right now would be here, in the U.S., from now until the end of the year.”

The Stoxx 600 climbed for a fourth day, as two shares advanced for every one that declined. EON SE jumped 3 percent after Germany’s biggest utility beat analyst earnings estimates. GAM Holding AG, the Swiss asset manager that split from Julius Baer Group Ltd. almost four years ago, rallied 9.7 percent as profit more than tripled.

The yen depreciated 1.3 percent to 98.16 per dollar and 1 percent per euro, the most in eight weeks. Europe’s shared currency slipped 0.3 percent to $1.3264.

Gold futures for December delivery fell 1 percent to $1,320.50 an ounce on the Comex in New York, after advancing 4 percent in the previous four sessions. The commodity has slumped 21 percent this year.

Crude advanced for a third day, with West Texas Intermediate rising 0.7 percent to $106.83 a barrel, as German investor confidence and U.S. retail sales bolstered optimism that economic growth and energy demand will accelerate.

Europe Yields

Germany’s benchmark 10-year bund yield gained 11 basis points to 1.81 percent. Spain’s yield spread over Germany fell nine basis points to 269 basis points after reaching 265, the tightest since August 2011.

The cost of insuring against losses on corporate bonds declined, with the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies decreasing 1 basis point to 94.7 basis points. High-yield corporate bonds rose for a 12th day in Europe, the longest stretch of gains since April, pushing borrowing costs down to the lowest in more than two months.

The MSCI Emerging Markets Index climbed 0.8 percent, advancing for a fourth day in the longest rally in almost four weeks. The Hang Seng China Enterprises Index jumped 2.6 percent to a two-month high. Russia’s Micex Index climbed 1.4 percent and India’s Sensex gained 1.5 percent. Benchmark gauges in South Korea, Taiwan, Indonesia, Thailand and the Philippines increased at least 1 percent.

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