S&P 500 Reaches Record as Treasuries Advance After Yellen

U.S. stocks rose, with the Standard & Poor’s 500 Index climbing to a record, as retailers led gains amid optimism over the holiday shopping season. Treasuries extended their advance after Janet Yellen said the American economy must improve before cuts to monetary stimulus.

The S&P 500 increased 0.8 percent to 1,782.00 by the close in New York, reclaiming its record on a closing basis for the first time since Oct. 29. The MSCI Emerging Markets Index retreated 1.2 percent in a 10th day of declines. Gasoline and cocoa jumped more than 1 percent to lead gains in commodities while silver futures capped their longest slump in seven months. The British pound rallied against all major peers. Index futures in Japan, Australia and South Korea rose.

Ten-year Treasury yields fell seven basis points to 2.70 percent as Yellen, the nominee for Federal Reserve chairman, said in remarks released before her appearance tomorrow before the Senate Banking Committee, that the U.S. economy and job market are performing “far short of their potential.” Macy’s Inc. jumped more than 9 percent for the biggest gain in the S&P 500 after reporting better-than-forecast earnings and signaling stronger demand heading into the holidays.

“People are starting to think about the implications of a positive holiday season,” Walter Todd, chief investment officer at Greenwood Capital Associates LLC, said in phone interview. “Retail for a while had been underperforming going back to the summer, but just the past couple weeks we’ve gotten some positive data points from Gap, Limited Brands and now Macy’s.”

‘Unconventional’ Tools

A strong recovery will “ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases,” Yellen said in text of her testimony.

Testifying to the Senate Banking Committee, Yellen will need to address the asset buying policy that’s swelled the Fed’s balance sheet to almost $4 trillion while facing four Republicans who voted no on her 2010 bid to be vice chairman. Scrutiny of the Fed’s quantitative easing program increased after reports last week showed U.S. payrolls and gross domestic product rose more than economists projected.

The S&P 500 recovered from yesterday’s 0.2 percent drop as consumer-discretionary, technology and consumer-staples shares led gains in nine of the 10 main industry groups. U.S. Steel Corp. rose 2.2 percent as Morgan Stanley upgraded its recommendation on the shares. Tesla Motors Inc. rose 0.7 percent as co-founder Elon Musk said the company won’t recall its Model S after fires involving the electric sedan.

Cisco Earnings

Crocs Inc., the shoemaker known for its brightly-colored clogs, jumped 9.8 percent after people who asked not to be identified discussing private information said that buyout talks are unlikely to lead to a sale of the company.

Cisco Systems Inc., the world’s biggest maker of computer-networking equipment, dropped more than 2 percent in after-market trading after reporting first-quarter revenue that fell short of analysts’ estimates.

Of the more than 450 S&P 500 members that have reported earnings this season, 75 percent have posted profit that exceeded analysts’ estimates, while 54 percent beat on sales, data compiled by Bloomberg show. Macy’s, the second-largest U.S. department-store company, said net income in the period ended Nov. 2 rose 22 percent as better local selections boosted sales. Their stock is up 30 percent this year.

Treasury yields also fell for the first time in three trading days as the Treasury’s auction of $24 billion in 10-year securities attracted the higher demand since September. Two-year yields dropped two basis points, or 0.02 percentage point, to 0.30 percent.

Yield Gap

The difference in yield between longer-maturity bonds and shorter-term debt is increasing as central banks pledge to keep down interest rates for a sustained period of time. The extra yield to maturity investors get for holding bonds maturing in 10 years or more, compared with those due in three-to-five years, increased to 1.78 percentage points yesterday, the widest spread since May 2010, according to Bank of America Merrill Lynch Global Broad Market Plus Indexes.

Nikkei 225 Stock Average futures climbed 0.4 percent to 14,660 by 3 a.m. in Osaka and traded at 14,700 in Chicago, from 14,600 yesterday in Japan. Contracts on Australia’s S&P/ASX 200 Index and Korea’s Kospi gauge gained 0.2 percent.

The MSCI Emerging Markets Index dropped to a two-month low. The Shanghai Composite Index slid 1.8 percent, the most in almost seven weeks, while the Jakarta Composite Index fell 1.8 percent before the government reported the current-account deficit narrowed in the third quarter. Benchmark gauges in Russia, Poland, Egypt, South Africa, South Korea, Taiwan and the Czech Republic all sank more than 1 percent.

European Stocks

OAO Mechel, Russia’s biggest producer of coal for steelmakers, plunged 41 percent in Moscow.

The Stoxx Europe 600 Index lost 0.6 percent as about four shares fell for every one that gained. ProSiebenSat.1 Media AG tumbled 4 percent as KKR & Co. and Permira Advisers LLP sold 35 million shares for about 1.1 billion euros ($1.48 billion). Stada Arzneimittel AG, Germany’s biggest publicly traded generic-drug maker, retreated 5.5 percent as earnings missed estimates. Intesa Sanpaolo SpA, Italy’s second-largest bank, slid 2.3 percent after profit fell as non-performing loans rose.

The pound gained versus all 16 major counterparts, advancing 0.5 percent against the euro. The U.K. jobless rate, which fell to 7.6 percent in the third quarter according to data released today, is more likely than not to reach 7 percent in the third quarter of 2015, based on the path of interest rates projected by investors, according to the Bank of England.

Yen Gains

The yen strengthened 0.4 percent to 99.27 per dollar and advanced 0.1 percent per euro. The 17-nation shared currency added 0.3 percent to $1.3474. Sweden’s krona weakened against 12 of 16 major peers after Finance Minister Anders Borg said policy makers need to monitor a drop in consumer prices brought on by a strong currency that he says is a “risk” to the economy.

Copper retreated 2 percent to $6,980 a metric ton on the London Metal Exchange, reaching the lowest price in more than three months, following record output in China, while oil rebounded from the lowest price since May. Refined-copper production in October in China rose 23 percent to 637,000 tons from a year earlier, according to data from the statistics bureau. That was 2.6 percent higher than the previous record in September.

Silver futures slid 1.2 percent in a fifth day of declines, the longest losing stretch since April amid mounting speculation the Fed will act sooner than expected to reduce stimulus, cutting demand for precious metals as alternative assets.

Commodity Moves

Gold futures fell a fifth day, the longest stretch of declines since August, dropping 0.2 percent to $1,268.40 an ounce in New York.

Natural gas sank 1.4 percent after rallying for six straight days on forecasts for colder-than-normal weather in the U.S. that may boost demand for the heating fuel. Crude oil gained 0.9 percent in New York to $93.88 a barrel on speculation that increasing refinery profits from making gasoline and heating oil will bolster use of the raw material.

Futures advanced as much as 1.6 percent as the margin to turn crude into fuel, expressed by the so-called crack spread, climbed to the highest level since August. Gasoline jumped on forecasts that a government report tomorrow will show supplies fell for a fifth week. WTI’s discount to Brent oil widened to the most in seven months as unrest in Libya disrupted exports.

Houston-based Schlumberger Ltd., the world’s largest oilfield-services provider, is selling bonds in euros as the cost of borrowing in the currency relative to U.S. dollars approaches the cheapest in almost five years.