Stocks Rise on Earnings as Oil, Gold Retreat Before Fed

Stocks rose in the U.S. and Europe as earnings beat analysts’ estimates at companies from BP Plc to Xylem Inc. The dollar gained and oil and gold paced losses in commodities, while Treasuries increased as the Federal Reserve began a two-day policy meeting.

The Standard & Poor’s 500 Index added 0.6 percent to 1,771.95 at 4 p.m. in New York, reaching a record for a third straight day. The Stoxx Europe 600 Index climbed 0.4 percent after BP raised its dividend and Spanish and Italian bonds gained. The Bloomberg U.S. Dollar Index, a gauge of the currency against 10 major peers, strengthened 0.4 percent. West Texas Intermediate crude slipped from a one-week high and gold futures dropped 0.5 percent to $1,345.50 an ounce, retreating from the highest level in five weeks.

Earnings and Fed stimulus have helped extend the S&P 500’s advance to 24 percent in 2013, which would mark its best yearly rally in a decade. Per-share profit has beaten the average analyst estimate at three-quarters of the 284 companies in the index that have reported their latest results, data compiled by Bloomberg show. The Fed began a two-day meeting today after consumer confidence fell, an Oct. 22 report revealed growth in American jobs slowed in September and data yesterday showed factory output and home sales missed forecasts.

“It still seems that the Fed has created this good-news-is-bad-news, bad-news-is-good-news scenario,” Randy Bateman, who oversees $15 billion as chief investment officer of Huntington Asset Advisors in Columbus, Ohio, said by telephone. “The anticipation is that the Fed will retain its purchasing of $85 billion in monthly Treasury and mortgage securities, which is going to continue to help the housing market. That will be taken fairly well by the market.”

Xylem Surges

Xylem, the water company whose pumps helped clean tunnels in New York flooded by Hurricane Sandy, surged 12 percent for the biggest gain in the S&P 500 and largest advance for the stock since it was spun off from ITT Corp. two years ago. The company posted earnings that beat estimates by 40 percent and raised annual profit and sales forecasts.

Pfizer Inc., the world’s biggest drugmaker, jumped 1.7 percent after profit beat analysts’ estimates on cost cuts and increased sales of its top vaccine and pain drugs. Masco Corp., which makes faucets and kitchen and bath cabinets, rose 2.6 percent as its sales topped forecasts.

Apple Inc., the world’s most valuable company, slipped 2.5 percent after earlier rallying as much as 1.8 percent. The maker of the iPhone said revenue in the current quarter will be $55 billion to $58 billion, compared with the $55.5 billion average of analysts’ estimates compiled by Bloomberg. Gross margins will be 36.5 percent to 37.5 percent, versus the 38 percent projection.

The Nasdaq Composite Index closed up 0.3 percent at 3,952.34, above its highest closing level in 13 years. Earlier, Nasdaq OMX Group Inc. indexes stopped updating for almost an hour starting at around 11:53 a.m. amid a data-feed error.

Economy Watch

Commerce Department figures showed today that retail purchases excluding vehicles gained 0.4 percent following a 0.1 percent increase in August and matched the median forecast of economists surveyed by Bloomberg. Total sales dropped 0.1 percent. A report from S&P/Case-Shiller showed house prices climbed at a faster rate in August, jumping 12.8 percent from the previous year.

The Conference Board’s consumer confidence index fell to 71.2 in October from 80.2 the month prior, below the median forecast in a survey of economists for a reading of 75.

Two shares advanced for each that declined in the Stoxx Europe 600 Index. BP jumped 5.6 percent, the most in almost three years.

Oil, insurance, telephone and technology companies posted the biggest gains in Europe while banks and household products companies led losses. UBS AG lost 7.7 percent after saying it probably won’t be able to reach its profitability goal in 2015.

Valuations Increase

This year’s rally in equities has pushed valuations on benchmark indexes in the U.S. and Europe to the highest levels in more than three years. The S&P 500 trades for 16.8 times reported earnings, the most since May 2010. The Stoxx 600 is valued at 20.9 times reported earnings and 14.9 times projected profit, the most expensive valuations since the end of 2009, according to data compiled by Bloomberg. The European gauge has rallied 15 percent this year following a similar gain in 2012.

The MSCI Emerging Markets Index rose for a second day, advancing 0.1 percent. India’s S&P BSE Sensex index added 1.7 percent, snapping a five-day slump, after the central bank further eased emergency measures imposed in July to support the rupee. Brazil’s Ibovespa index slid 1 percent as Eike Batista’s OGX Petroleo e Gas Participacoes SA sank after ending talks with bondholders without an agreement, outweighing gains by lender Itau Unibanco Holding SA. Argentina’s Merval sank 4.6 percent, the most in two years.

Czech Rally

The Czech PX Index rose 2.7 percent, the most since January, after parties pledging to increase company taxes failed to gain control of parliament in general elections over the weekend.

The Shanghai Composite Index fell 0.2 percent to a seven-week low after the People’s Bank of China’s first cash injection in two weeks failed to reduce money-market rates.

WTI oil fell 0.5 percent to $98.20 a barrel, its first drop in four days, before government data tomorrow that’s forecast to show crude stockpiles rose to a four-month high in the U.S., the world’s biggest consumer of the fuel.

Coffee Slump

Coffee futures capped the longest route in more than four decades as wet weather signaled bigger crops than forecast in Brazil, the world’s largest grower. Increasing precipitation in Brazil this week will improve conditions for crops that have been able to flower multiple times amid ample rain, MDA Weather Services in Gaithersburg, Maryland, said yesterday. Soil moisture will also gain in Colombia, the second-biggest producer, the forecaster said.

Arabica coffee for delivery in December fell 0.6 percent to $1.0695 a pound on ICE Futures U.S. in New York, after touching $1.066, the lowest since March 2009. A decline today would be the 11th straight, the longest slump since at least 1972.

Australia’s dollar slid to a two-week low after Reserve Bank Governor Glenn Stevens said the nation’s terms of trade are likely to worsen and its currency may be “materially lower” than current levels. The Aussie weakened 1 percent to 94.78 U.S. cents.

Spain’s government bonds rose for a second day, pushing 10-year yields to the lowest level since May, as a report showed retail sales rose in September, adding to evidence the nation’s recovery is gaining momentum. The rate dropped five basis points to 4.05 percent. Italy’s 10-year yield fell six basis points to 4.14 percent.

Butterfly Spread

Ten-year Treasury yields were down two basis points at 2.50 percent. Treasury five-year notes were the most expensive in four months relative to two- and 10-year securities before the U.S. sells $35 billion of 2018 debt today.

The so-called butterfly spread measuring differences between the yields was negative 30 basis points, a level not seen since June 18, based on closing prices. The figure reflects increased demand for the middle security over the outliers.

The Treasury sold $32 billion of two-year securities yesterday with a bid-to-cover auction ratio, which gauges demand by comparing total bids with the amount of securities offered, at 3.32, the highest level since April.

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