Emerging Markets Jump as S&P 500 Retreats From Record

Emerging market stocks jumped the most in two months and metals rallied after the Federal Reserve unexpectedly refrained from cutting monetary stimulus. U.S. shares retreated after benchmark indexes reached records yesterday.

The MSCI Emerging Markets Index rallied 2.4 percent at 4 p.m. in New York as Turkish shares jumped the most in three years. The MSCI All-Country World Index climbed to the highest level since 2008 while the Standard & Poor’s 500 Index slipped 0.2 percent after rallying 1.2 percent yesterday. The cost of insuring high-yield European company bonds against losses fell to the lowest since May 2011. Copper jumped more than 2 percent while oil fell for the fourth time in five days.

U.S. policy makers said yesterday they want more evidence of an economic recovery before paring its $85 billion-a-month quantitative-easing program. Fed Chairman Ben. S. Bernanke, who said in June the central bank may start curbing stimulus this year and end it in 2014 if the economy finally achieves sustainable growth, said yesterday the central bank must determine its policies based on “what’s needed for the economy,” even if it surprises markets.

“Bernanke had threatened to take away the punchbowl and bring the QE-party to an end,” Kit Juckes, a global strategist at Societe Generale SA in London, said in a report today. “But he’s changed his mind, found more happy juice, and told us all to ’Party on, dude!’”

Emerging Markets

The MSCI Emerging Markets Index pared its decline for the year to 2.9 percent. The Borsa Istanbul National 100 Index extended its gain from a low on Aug. 28 to more than 20 percent, the common definition of a bull market. The Jakarta Composite Index rallied 4.7 percent, the most in almost two years, while Brazil’s Ibovespa slipped 1.3 percent after jumping 2.6 percent yesterday.

India’s Sensex rose 3.4 percent and the rupee rallied 2.5 percent, paring this year’s drop to 11 percent. The Malaysian ringgit appreciated 2.6 percent, the most since 1998.

Global funds were boosting holdings of Asian assets in the run-up to yesterday’s Fed announcement and this trend is likely to be “reinforced” in coming trading sessions, according to Mitul Kotecha, the global head of foreign-exchange strategy at Credit Agricole SA in Hong Kong. Overseas investors pumped about $10.5 billion into equities in South Korea, Taiwan and India this month, after net sales of about $500 million in August.

The S&P 500 retreated today after jumping the most since Aug. 1 to a record yesterday.

“It’s been essentially a bleeding off of some of the party atmosphere from yesterday,” Kevin Caron, a Florham Park, New Jersey-based market strategist at Stifel Nicolaus & Co., which oversees about $150 billion, said by phone. “At some point the market’s got to take a breather and I think today’s that day. There’s no real catalyst today in the data.”

U.S. Movers

Among U.S. stocks moving today, ConAgra Foods Inc. lost 4 percent after first-quarter sales missed analyst estimates. Walt Disney Co. dropped 2.1 percent as Morgan Stanley downgraded the shares.

Apple Inc. jumped 1.6 percent to pace advances among technology shares before the release of its new iPhone models. Agilent Technologies Inc. added 3.4 percent as the provider of bio-analytical and electronic measurement services said it will split into two public companies. Rite Aid Corp. surged 23 percent as the drugstore chain raised its profit forecast.

Economic Data

A Labor Department report showed jobless claims in the U.S. rose less than forecast last week as two states began working through a backlog of applications that were caused by computer-system changeovers. Another report showed sales of previously owned U.S. homes unexpectedly rose in August to the highest level in more than six years as buyers rushed to lock in interest rates before they rise further. Purchases climbed 1.7 percent to a 5.48 million annual rate, the National Association of Realtors said.

Equity gauges whose performance some chart analysts consider predictive of stock market gains closed at records yesterday, including the Dow Jones Transportation Average, the Russell 2000 Index and the Morgan Stanley Cyclical Index. The S&P 500 Financials Index is about 1 percent from its five-year high from July though it remains 45 percent below its 2007 record, according to data compiled by Bloomberg.

European Markets

The Stoxx Europe 600 Index rallied 0.6 percent to the highest level in more than five years. Mining companies helped lead gains, with Randgold Resources Ltd., Fresnillo Plc and Lonmin Plc climbing at least 5.4 percent. The volume of shares changing hands in the Stoxx 600 was 35 percent greater than the 30-day average, according to data compiled by Bloomberg.

Volatility fell, with the VStoxx Index, a gauge of the cost of using options to hedge against moves in the Euro Stoxx 50 Index, sinking 7.1 percent to a one-month low.

The S&P GSCI lost 0.4 percent after advancing 1.5 percent yesterday. Oil and gasoline fell more than 1 percent, while nickel, lead, aluminum and copper climbed more than 2 percent.

Spot gold prices added 0.4 percent $1,369.20 an ounce, after yesterday’s 4.1 percent gain, the biggest jump since June 2012. Gold rose 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system by purchasing debt. Silver added 1.1 percent after rallying 5.5 percent yesterday, the most since June 28.

WTI declined 1.6 percent to $106.39 a barrel as Libya’s oil production increased and President Bashar al-Assad said Syria will make available information about its chemical weapons.

Japan Stimulus

The yen slid 1.5 percent versus the dollar after a Bank of Japan policy maker said pressure may mount to expand on unprecedented monetary stimulus. The Bloomberg U.S. Dollar Index rose 0.3 percent, after dropping for four days and reaching the lowest level since February yesterday.

The pound fell 0.7 percent to $1.6031 after a report showed U.K. retail sales unexpectedly dropped in August.

Five-year Treasury yields increased five basis points to 1.48 percent after dropping to 1.38 percent, the lowest since Aug. 12, based on Bloomberg Bond Trader data. The yield tumbled 18 basis points yesterday, the biggest drop since March 18, 2009.

The 10-year yield rose six basis point to 2.75 percent, having fallen as low as 2.67 percent yesterday, the least since Aug. 13, after the Fed said it needed more evidence of a lasting improvement in the economy before scaling back stimulus. Yields on the 10-year notes, the benchmark for loans ranging from mortgages to corporate bonds, climbed to 3.01 percent on Sept. 6 from 1.93 percent on May 21, the day before Bernanke said the central bank could slow the pace of asset purchases in the next few policy meetings.

French 10-year rates dropped nine basis points to 2.42 percent, while similar-maturity Dutch yields slid seven basis points to 2.28 percent.

Credit-default swaps insuring speculative-grade bonds dropped to the lowest since May 2011. The Markit iTraxx Europe Crossover Index of credit-default swaps on 50 junk-rated companies decreased 12 basis points to 364 basis points.

Before it's here, it's on the Bloomberg Terminal.