U.S. Stocks Climb While Yen, Gold Trim Gains on Debt TalkStephen Kirkland and Nick Taborek
U.S. stocks rose, erasing early losses, as Senate leaders in both parties said they are optimistic about ending a partial government shutdown and preventing the nation from breaching the debt ceiling in three days. The yen and gold pared gains.
The Standard & Poor’s 500 Index added 0.4 percent to an almost one-month high of 1,710.14 at 4 p.m. in New York, reversing a loss of as much as 0.7 percent. Trading of S&P 500 stocks was 17 percent below the 30-day average and the U.S. cash bond market was shut for Columbus Day. The Nasdaq-100 Index jumped to a 13-year high. The cost of insuring against losses on Treasuries climbed. The Stoxx Europe 600 Index added 0.2 percent. Gold gained 0.7 percent, trimming a 1.4 percent rise, and natural gas touched the highest in almost four months.
Stocks began to recover as the White House said in a statement that President Barack Obama and Vice President Joe Biden will meet with congressional leaders at 3 p.m. in Washington. The meeting was delayed after Obama said “important progress” had been made in negotiations and the administration said the delay will give both sides more time for talks. The U.S.’s borrowing authority is set to lapse Oct. 17.
“Investors are encouraged that the political posturing appears to be dying down and that real negotiations are under way,” Alan Gayle, senior strategist at RidgeWorth Capital Management, said by phone from Atlanta. His firm oversees about $48 billion. “The expectation is that as long as there are genuine negotiations, that there will be a reasonable solution that will avoid a default and secondly will get the government up and running again.”
The S&P 500 advanced 3.3 percent in four sessions, the biggest rally since January, and closed today at the highest level since Sept. 19. Health-care, energy and technology shares rose at least 0.5 percent to lead gains in eight of the 10 main industries.
Among stocks moving today, Netflix Inc. jumped 7.8 percent on reports that the company is in talks to get its service on cable operators’ set-top boxes. St. Jude Medical Inc. rose 1.6 percent after the maker of heart-rhythm devices bought specialist device maker Nanostim Inc. for $123.5 million. Whirlpool Corp. lost 6.5 percent as Cleveland Research said appliance demand has softened in the past month. Expedia Inc. slid 6.2 percent after Deutsche Bank AG cut its rating on the online travel agency.
The prospect of a U.S. default threatens the U.S. and world economies, International Monetary Fund Managing Director Christine Lagarde said.
“If there is that degree of disruption, that lack of certainty, that lack of trust in the U.S. signature, it would mean massive disruption the world over,” Lagarde said in an interview on NBC. “And we would be at risk of tipping, yet again, into recession.”
Hedge funds, whose bearish bets on stocks have held their returns to half the S&P 500 in 2013, pushed short sales close to the highest level of the year just as the U.S. budget impasse spurred a doubling in volatility.
Rising bets against equities sent a gauge of manager bullishness compiled by ISI Group LLC within 0.2 point of its lowest reading in 2013 last week. Short sales have backfired as the S&P 500, up 19 percent this year, posts one of its broadest rallies on record. It has swung an average of 0.82 percent a day in October, compared with 0.45 percent in the third quarter.
The Stoxx 600 earlier declined as much as 0.4 percent, with volume 23 percent lower than the 30-day average.
PSA Peugeot Citroen tumbled 9.1 percent, the most in more than two years. The company is considering stake sales to Dongfeng Motor Corp. and the French government to shore up its finances and its board will consider a capital increase at a scheduled meeting on Oct. 22, said people familiar with the matter who asked not to be identified because the gathering is private.
Credit-default swaps on Peugeot dropped for a 10th day, falling 54 basis points to 387.5 basis points.
Dassault Systemes SA, a French maker of design software, sank 11 percent for its biggest drop in five years as revenue fell short of its forecasts. Konecranes Oyj slid 2.3 percent as the Finnish maker of lifting equipment cut its outlook.
The MSCI Emerging Markets Index was little changed after slipping 0.3 percent earlier. Russia’s Micex Index slipped 0.1 percent after the central bank kept its key rate unchanged. Brazil’s benchmark Ibovespa index surged 1.9 percent, the most in almost a month. Taiwan’s benchmark Taiex Index lost 0.9 percent as Hon Hai Precision Industry Co. slid 1.9 percent in Taipei after KGI Securities Co. cut estimates for shipments of Apple Inc.’s iPhone 5C handsets.
The Shanghai Composite Index advanced 0.4 percent, led by railway companies on speculation they may help build Thailand’s high-speed train system, offsetting data showing lower exports and faster inflation. The yuan strengthened to a 20-year high of 6.1073 per dollar after the central bank set the currency’s reference rate to a record.
China’s exports unexpectedly fell last month and inflation jumped on food prices, signaling constraints on the nation’s recovery as Premier Li Keqiang seeks to sustain growth without adding monetary stimulus.
India’s rupee slid 0.8 percent and the BSE S&P Sensex index of stocks pared earlier gains, adding 0.4 percent, after a report showed inflation unexpectedly quickened to a seven-month high in September.
Markets in Japan, Hong Kong and Indonesia were closed for holidays.
The yen appreciated less than 0.1 percent to 98.53 per dollar, trimming a 0.5 percent advance, and was little changed against the euro after climbing 0.5 percent earlier. Europe’s 17-nation shared currency added 0.2 percent to $1.3565.
JPMorgan Chase & Co.’s G-7 Volatility Index, a measure of price swings among Group of Seven nations’ currencies, fell to 8.22 percent, the lowest level since January. The gauge climbed to this year’s high of 11.96 percent on June 24. The 2013 average is 9.48 percent.
Washington’s wrangling over a partial government shutdown and lifting the U.S.’s borrowing limit has strategists cutting their forecasts for the dollar for a third straight month, the longest stretch this year.
From Credit Suisse Group AG to Westpac Banking Corp., firms have lowered the median estimate for the U.S. currency versus the euro, pound, Canadian dollar, Swiss franc and Japanese yen by an average 1.2 percent in October, data compiled by Bloomberg show. That follows a 1.7 percent reduction last month, which was the biggest this year, and a 1.2 percent cut in August.
Credit-default swaps on U.S. Treasuries increased six basis points to 40 basis points, according to data compiled by Bloomberg. That compares with 21 basis points last month and 65 basis points in 2011, the last time Congress played brinkmanship over the nation’s debt limit.
Swaps on Treasuries were the ninth most traded of 1,000 entities tracked by the Depository Trust & Clearing Corp. in the week through Oct. 4, up from 147th two weeks before, with 87 trades covering a gross $2.3 billion of debt.
There are now 953 contracts covering a net $3.6 billion of Treasuries outstanding, the most in a year and up from a more than two-year low of $3.1 billion on Sept. 20.
Gold climbed 0.7 percent to $1,276.60 an ounce after falling 3 percent last week. U.S. natural gas gained as much as 2.1 percent to the highest price since June 21 as forecasts for unusually cool U.S. weather signaled an early start to the peak heating-demand season. Below-normal temperatures are expected from the Great Lakes to the Rocky Mountains from Oct. 16 through Oct. 25, according to MDA Weather Services. Crude oil climbed 0.4 percent to settle at $102.41 a barrel.