U.S. Shares Rebound While Oil, Gasoline Rally; Gold Falls

The Standard & Poor’s 500 Index rose following its first three-day slump since September, as gasoline and oil rallied while gold and silver slid. Emerging market stocks fell as a gauge of Chinese manufacturing missed estimates and the Federal Reserve said it may reduce stimulus.

The S&P 500 added 0.8 percent to 1,795.85 by 4:30 p.m. in New York, after losing 0.9 percent in the previous three sessions, while the Dow Jones Industrial Average closed above 16,000 for the first time ever. The MSCI Emerging Markets Index sank 1.4 percent and Brazil’s real lost 1.4 percent versus the dollar, leading emerging market currencies lower. Oil climbed the most in seven weeks and gasoline rose to a two-month high, while gold futures reached the lowest price since July.

U.S. stocks rebounded after sliding yesterday when minutes from the Fed’s last meeting showed policy makers expected ongoing improvement in the labor market to “warrant trimming the pace of purchases in coming months.” U.S. reports today showed jobless claims slid more than forecast, while a gauge of manufacturing in the Philadelphia area trailed economists’ estimates. China’s manufacturing fell for the first time in four months, and the Bank of Japan left policy unchanged.

“After three consecutive negative days it’s reasonable to expect a breather,” Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $364 billion, said in a phone interview. “There is some good news in the labor report too in that it does indicate a degree of improvement in the labor market.”

Annual Advance

The S&P 500 fell the past three days after reaching its latest record Nov. 15. The benchmark index is up more than 25 percent in 2013, poised for its best yearly gain in a decade, and traded at 17 times its companies’ reported earnings at the last record, the highest valuation in more than three years.

Stocks have rallied this year, extending the S&P 500’s gain from its bear-market low in 2009 to 165 percent, amid growth in earnings and unprecedented monetary stimulus from the Fed. The Senate Banking Committee today voted 14-8 to approve Janet Yellen as the next chairman of the Fed, sending the nomination to the full Senate for approval.

Among U.S. stocks moving today, Johnson Controls Inc., the largest U.S. auto-parts maker, rallied as much as 7.6 percent to a record $51.90 a share after saying that it will increase a stock-repurchase program by $3 billion and raise its dividend by 16 percent due to confidence in its outlook for fiscal 2014 and beyond.

Apple Inc. rose 1.2 percent, extending gains after winning $290 million in damages from Samsung Electronics Co. for infringement of some of its patents. Apple sought $380 million in the case, while Samsung recommended the jury award $52 million.

Dow Drivers

General Motors Co. jumped 1.1 percent, snapping a three-day drop. The U.S. Treasury Department announced plans to sell its remaining 31.1 million common shares in the automaker, possibly by year end depending on market conditions and trading volumes.

Green Mountain Coffee Roasters Inc., the maker of Keurig-brand single-cup pods and machines, jumped 14 percent after reporting fourth-quarter profit that beat estimates. Target Corp. lost 3.5 percent after profit declined as U.S. consumers curtailed spending. Dollar Tree Inc. slid 4.5 percent as third-quarter earnings fell short of forecasts.

Gains of more than 2 percent in Intel Corp. and American Express Co. fueled the Dow’s 0.7 percent jump to 16,009.99 after two days of declines. The gauge has climbed 22 percent this year, also set for the biggest annual advance in a decade.

Employment Data

U.S. jobless claims dropped by 21,000 to 323,000 last week, the fewest applications since September, the Labor Department said. The median forecast of 47 economists surveyed by Bloomberg called for a drop to 335,000. Another report showed wholesale prices fell for a second month in October and the Philadelphia Fed’s index of manufacturing in the region dropped to 6.5 in November, trailing the median economist estimate for a reading of 15.

Ten-year Treasury yields reversed their climb after rising to the highest level since September. Rates on the notes lost one basis point, or 0.01 percentage point, to 2.79 percent after rising nine basis points yesterday.

About three stocks fell for each that gained in MSCI’s emerging-markets gauge. Markets in Asia and Europe were closed when the Fed’s minutes were released yesterday.

The Fed “minutes were perhaps on the hawkish side as it was difficult to rule out the December taper,” Jim Reid, a strategist at Deutsche Bank AG in London, wrote in a report. “To taper ahead of year-end would likely be negative for markets as there hasn’t been enough consistently strong data for markets to calmly accept a handover from the huge external support to organic growth.”

Emerging Markets

India’s S&P BSE Sensex Index slid 2 percent, the most since September. Benchmark gauges in South Korea, Taiwan and Thailand declined more than 1 percent.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong fell 0.9 percent. A preliminary Purchasing Managers’ Index of China’s factory activity in November from HSBC Holdings Plc and Markit Economics dropped to 50.4 from 50.9 the previous month. Analysts surveyed by Bloomberg had expected a reading of 50.8, with 50 the dividing line between growth and contraction.

Three shares declined for every two that advanced in the Stoxx Europe 600 Index, sending the regional benchmark down 0.2 percent amid trading volumes that were 21 percent less than the 30-day average, according to data compiled by Bloomberg.

European Movers

Atos, a French computer-services supplier, lost 4.1 percent after an investor sold 8.9 million shares. Intermediate Capital Group Plc retreated 3.4 percent after Numis Securities Ltd. cut its rating on the money manager.

Johnson Matthey Plc, the producer of a third of the world’s auto-catalysts, climbed 3.8 percent after reporting a profit increase in the first half of the year. Daily Mail & General Trust Plc, the publisher of Britain’s second-biggest U.K. daily newspaper, rose 2.6 percent after saying its dependence on newspapers for revenue dropped.

Japan’s currency slid against 14 of its 16 major counterparts, losing 1.4 percent versus the euro. The yen weakened past 101 per dollar for the first time since July after the Bank of Japan stuck to its pledge to expand the nation’s monetary base. The Bloomberg U.S. Dollar Index rose 0.2 percent, advancing for a second day.

European Central Bank President Mario Draghi said policy makers haven’t changed their mind on a negative deposit rate.

Euro Rebound

The euro weakened 0.7 percent versus the dollar yesterday after the ECB was said to weigh a negative deposit rate to ward off deflation, according to people familiar with knowledge of the debate who asked not to be identified because the talks aren’t public. The ECB would reduce the rate for commercial lenders who park excess cash at the bank to minus 0.1 percent from zero, the people said.

The shared currency rebounded today, rising 0.3 percent to $1.3482, as Draghi said “don’t try to infer anything from what I say, anything about the possibility of negative rates.”

“This was discussed in the last monetary-policy meeting and there’s no more news since then,” he said in a speech in Berlin today.

The yield on U.K. 10-year gilts jumped nine basis points to 2.82 percent. U.S. Treasury 10-year yields note yields erased earlier gains to fall 1.8 basis point to 2.78 percent after rising nine basis points yesterday.

Commodity Markets

Australia’s dollar dropped to a two-month low of as little as 91.99 U.S. cents after central bank Governor Glenn Stevens said he remained “open-minded” on currency intervention, even as policy makers had been unconvinced that the benefit of lowering the currency, known as the Aussie, would outweigh costs.

The S&P GSCI Index of 24 commodities increased 1.3 percent, the most in more than a month. Gasoline futures led gains, rising as much as 3.1 percent to a two-month high, as the largest oil refinery in the U.S. carried out maintenance, threatening to curtail supplies. Motiva Enterprises LLC began work at its 600,000-barrel-a-day Port Arthur, Texas, plant on Nov. 19, according to Destin Singleton, a company spokeswoman based in Houston.

West Texas Intermediate oil for January delivery rallied 1.7 percent to $95.44 a barrel.

Gold futures for December delivery slid 1.1 percent to $1,243.60 an ounce, while contracts on silver slipped 0.6 percent to $19.976 an ounce.

Gold, iron ore, soybeans and copper will probably drop at least 15 percent next year as commodities face increased downside risks even as economic growth in the U.S. accelerates, according to Goldman Sachs Group Inc.

The risks are strongest for iron ore and follow increases in supplies, analysts including Jeffrey Currie wrote in a report yesterday that identified the New York-based bank’s top 10 market themes for the coming year. Price pressures will mostly become visible later in 2014, the analysts wrote, forecasting that bullion, copper and soybeans will decline to the lowest levels since 2010.

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