Stocks Rise as Treasuries, Metals Fall Amid U.S. ShutdownClaudia Carpenter and Nikolaj Gammeltoft
Stocks rebounded from yesterday’s slide as investors speculated the economic effects from the shutdown of the U.S. government will be limited and counteracted by Federal Reserve stimulus. Treasuries fell as gold tumbled and the dollar recovered from early losses.
The Standard & Poor’s 500 Index advanced 0.8 percent to 1,695.0 at 4 p.m. in New York after the benchmark index retreated 2.6 percent from its last record on Sept. 18. The S&P GSCI gauge of 24 commodities declined 0.5 percent as precious and industrial metals led losses, with gold futures tumbling 3.1 percent to $1,286.10 an ounce. Treasury 10-year yields rose three basis points to 2.64 percent. The Bloomberg U.S. Dollar Index recovered from an early decline to trade little changed.
Congress’s failure to pass a budget closed the government for the first time in 17 years, setting the stage for a debate on raising the U.S. debt ceiling within three weeks. The Bank of Japan’s Tankan survey on business confidence rose to the highest level in almost six years. A report on U.S. manufacturing showed faster-than-forecast growth and factory output in the 17-nation euro area expanded for a third month.
“The Fed is looking at this too and seeing how it may hurt economic growth, so their tapering plans are getting delayed,” Thomas Nyheim, a Wilmington, Delaware-based fund manager for Christiana Trust, which oversees about $16.6 billion, said by phone. “That would be a positive for stocks.”
The partial shutdown will put as many as 800,000 federal employees out of work today, halting some government services after Congress failed to break a partisan deadlock. A government shutdown or failure to raise the debt limit “could have very serious consequences” for the economy and policy makers will have to take that into account, Fed Chairman Ben S. Bernanke said Sept. 18 after the central bank unexpectedly refrained from reducing its bond purchases.
An extended government stoppage may prevent the release of jobs data on Oct. 4 that is closely watched for clues to Fed policy.
The standoff that may be a buying opportunity for stock investors, if history is any guide. The S&P 500 has risen 11 percent on average in the 12 months following past government shutdowns, according to data compiled by Bloomberg on instances since 1976. That compares with an average return of 9 percent over 12 months. In all the cases, the U.S. equity benchmark was higher by the end of the next two years.
The S&P 500 rebounded today after falling in seven of the previous eight sessions and closing at the lowest level since Sept. 9 yesterday. The benchmark gauge rose 4.7 percent last quarter and closed at a record of 1,725.52 on Sept. 18. The MSCI All-Country World Index of global shares dropped 0.8 percent yesterday, the most since Aug. 27, to trim its quarterly gain to 7.4 percent.
Among stocks moving in the U.S., Merck & Co. jumped 2.4 percent after the company announced an overhaul that will eliminate 8,500 workers. Walgreen Co. rose 4.5 percent as profit increased 86 percent after its customer-loyalty card boosted sales. Under Armour Inc. increased 4.1 percent as JPMorgan Chase & Co. upgraded the maker of workout clothing. Ford Motor Co. added 1.9 percent after posting a surprise sales gain in September.
Apple Inc. climbed 2.4 percent after billionaire Carl Icahn wrote on Twitter that he “pushed hard” for a $150 billion stock buyback in talks with Chief Executive Officer Tim Cook. Icahn, who owns $1 billion in Apple shares, said he plans to continue discussions in three weeks.
The Institute for Supply Management’s index unexpectedly rose to 56.2, the strongest since April 2011, from 55.7 a month earlier. Readings above 50 indicate growth. The median forecast in a Bloomberg survey of economists was 55.
The Stoxx Europe 600 Index rose 0.8 percent after falling to the lowest level in almost three weeks yesterday. Telecom Italia SpA advanced 5.2 percent after surging a similar amount yesterday amid speculation Chief Executive Officer Franco Bernabe will resign. Goldman Sachs Group Inc. reinstated coverage of the phone company with a buy recommendation. Unilever slid 2.8 percent after the second-largest consumer-goods maker said sales growth slowed in the last quarter.
In Japan, confidence among large manufacturers rose to the highest level since the early stages of the global credit crisis in 2007, with the quarterly Tankan index for big manufacturers rising to 12 in September from 4 in June, the BOJ said today. Euro-area manufacturing was 51.1 in September compared with 51.4 in August, London-based Market Economics said today. A reading above 50 indicates growth.
The dollar recovered after falling to the weakest level in 19 months against the Swiss franc, trading up 0.1 percent at 90.55 centimes after reaching 89.93. The U.S. currency was little changed at $1.3531 per euro after sliding to $1.3588, the weakest since Feb. 6. The pound erased almost all of this year’s 8.9 percent decline against the greenback and the yen strengthened 0.4 percent to 97.83 per dollar.
The Aussie surged 0.9 percent to 93.98 U.S. cents. Sweden’s krona jumped as a report showed manufacturing expanded at the fastest pace in more than two years.
Spain’s 10-year bond yield fell 13 basis points to 4.17 percent and Portugal’s dropped nine basis points to 6.59 percent.
The MSCI Emerging Markets Index rose 0.7 percent, increasing for the first time in six days after capping its first quarterly gain this year.
The Borsa Istanbul National 100 Index climbed 2.7 percent, the biggest gain in emerging markets, and Turkey’s two-year benchmark notes snapped six days of losses while the lira strengthened. The nation’s manufacturing PMI rose to 54 last month from 50.9 in August, according to data from HSBC Holdings Plc and Markit Economics today.
Indonesia’s JCI Index added 0.7 percent after the country reported an unexpected trade surplus in August, compared with the forecast $810 million deficit in a Bloomberg survey.
Gold, lead, silver and zinc each lost more than 2 percent to lead declines in 18 of the 24 commodities tracked by the S&P GSCI Index. Crude oil fell 0.3 percent to $102.04 a barrel in New York, the lowest level in almost three months. A government report tomorrow may show crude supplies rose last week as refineries idled units for seasonal maintenance, according to a Bloomberg survey.