Stocks Rise on Manufacturing Growth as Oil, Silver Gain

U.S. equities rebounded from the worst weekly slump since August and European stocks rose the most in two months amid manufacturing growth and as investors awaited the outcome of the Federal Reserve’s meeting. Brent oil jumped as Libyan rebels refused to hand over control of ports.

The Standard & Poor’s 500 Index rose 0.6 percent to 1,786.54 by 4:30 p.m. in New York, while the Stoxx Europe 600 Index increased 1.3 percent, the most since Oct. 10. The Bloomberg U.S. Dollar Index slipped 0.1 percent as the yen maintained gains versus the greenback. Ten-year Treasury yields rose one basis point to 2.88 percent. Brent and West Texas Intermediate oil jumped at least 0.9 percent and silver rallied more than 1 percent to help lead gains in commodities.

Euro-area manufacturing reached a 31-month high in December, led by Germany, a survey from London-based Markit Economics showed. Another report showed U.S. industrial production climbed in November by the most in a year, a sign factories are bolstering the world’s biggest economy. Fed policy makers start a two-day meeting tomorrow and economists see an increased chance that they will begin reducing stimulus.

“The big issue this week is the Fed’s meeting and what, if anything, they’re set to do,” Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, which oversees $60 billion, said from Philadelphia. “Either the market is increasingly resigned to the fact that the Fed is going to taper and it’s OK, or it’s not likely to happen in December, and they get to live on this liquidity for another month or two.”

Year-End Gains

The S&P 500 rebounded after falling for four straight days following its last record reached Dec. 9. The gauge declined 1.6 percent last week. The benchmark U.S. index has gained 1.2 percent on average in the last 10 days of the year, according to data since 1928 compiled by Bloomberg. That compares with a 0.3 percent return for comparable periods. Since the bull market began in 2009, the index has increased an average of 1.5 percent in the last 10 days of December.

Among stocks moving today, International Business Machines Corp., Exxon Mobil Corp. and Cisco Systems Inc. climbed at least 2 percent to pace gains in 26 of 30 stocks in the Dow Jones Industrial Average.

Exxon rallied 2 percent after Goldman Sachs Group Inc. raised the stock’s rating. American International Group Inc. rose 1.1 percent after agreeing to sell its plane-leasing unit to AerCap Holdings NV for $5 billion. LSI Corp. soared 39 percent after Avago Technologies Ltd. agreed to buy it in a deal valued at $6.6 billion. Cirrus Logic Inc. dropped 1.8 percent as Oppenheimer & Co. downgraded the shares.

Boeing Buyback

Boeing Inc. jumped more than 1.6 percent in after-hours trading after authorizing an additional $10 billion share buyback and boosting its dividend by 50 percent.

Companies buying their own stock make up more of the U.S. equity market than ever before, underpinning share values even as the Fed prepares to reduce stimulus.

Stock acquired under company repurchase programs represented 6.4 percent of daily trading in the Russell 3000 Index by value through Sept. 30, exceeding 2007’s level of 4.1 percent, according to data compiled by Bloomberg and Birinyi Associates Inc. The proportion of trading is higher even as chief executive officers spend $343 billion less on buybacks so far this year, reflecting a seven-year decline in equity volume.

Apple Inc. to Walt Disney Co. and International Business Machines Corp. took advantage of record-low interest rates to raise an unprecedented amount of debt financing and repurchased stock, helping boost per-share U.S. earnings for four years. With cash at a record, buying by companies is poised to continue in a bull market that is about to enter its sixth year.

U.S. Manufacturing

Economic data today showed output at U.S. factories, mines and utilities rose 1.1 percent after a revised 0.1 percent gain in October that was previously reported as a decline, a report from the Fed showed today. The median forecast in a Bloomberg survey called for a 0.6 percent increase. The index of industrial production rose to 101.3, exceeding for the first time its pre-recession peak in December 2007.

The New York Fed’s gauge of manufacturing in that region rose to 0.98 in December, below the median reading of 5 forecast in a survey of economists.

The Fed may begin reducing its $85 billion of monthly bond purchases at its Dec. 17-18 meeting, according to 34 percent of economists in a Dec. 6 Bloomberg survey, up from 17 percent in a Nov. 8 poll. Policy makers have kept their target for federal funds, which banks charge each other on overnight loans, at zero to 0.25 percent since 2008 to support the economy. The odds of an increase by January 2015 are about 16 percent, based on data compiled by Bloomberg from federal funds futures.

Options Signal

U.S. equity options markets flashed another bearish signal last week when the price of the benchmark volatility index traded at a premium to its own futures, a sign demand is increasing for protection against stock losses.

The Chicago Board Options Exchange Volatility Index jumped 17 percent from Dec. 9 to 15.76 at the end of last week and twice closed above its one- and two-month futures in the past three days, data compiled by Bloomberg show. The index that tracks S&P 500 contract prices rose 14 percent last week.

Asian index futures rose in their most recent sessions, with contracts on Australia’s S&P/ASX 200 Index gaining 0.7 percent. Futures on South Korea’s Kospi Index and the Hang Seng and Hang Seng China Enterprises gauges in Hong Kong climbed at least 0.9 percent. Nikkei 225 Stock Average futures added 0.9 percent to 15,360 by 3 a.m. in Osaka and fell 0.8 percent to 15,345 in Chicago.

European Movers

About six stocks advanced for each that fell in the Stoxx 600. Aggreko Plc, which provides mobile-power generators, gained 8.5 percent after saying net debt will decline. Deutsche Telekom AG rose 3.8 percent after the Wall Street Journal reported that Sprint Corp. is considering a bid for T-Mobile US Inc., in which the German company owns 74 percent.

Hennes & Mauritz AB, Europe’s second-biggest clothing retailer, climbed 1.7 percent after saying sales at stores and operations open at least a year rose 10 percent in November compared with a year earlier. PSA Peugeot Citroen lost 4 percent, extending its Dec. 13 drop of 12 percent, after General Motors Co. sold its entire 7 percent stake.

A Markit Economics report showed that euro-area output rose to 52.7, from 51.6 in November. That’s above the estimate of 51.9 in a Bloomberg News survey of 35 economists. The gauge has been above 50, indicating expansion, for six months. European Central Bank President Mario Draghi is scheduled to speak to the European Parliament in Brussels.

Gold Futures

The euro’s advance followed five weekly gains against the dollar. The yen climbed 0.2 percent to 103.02 per dollar, climbing a second trading day after touching 103.92 Dec. 13, the weakest level since October 2008.

Gold futures advanced 0.5 percent to $1,240.90 an ounce. Brent rose 1.5 percent to $110.47 a barrel after Libyan rebels refused to hand over control of three oil ports to the government. U.S. natural gas dropped 1.8 percent after surging 5.8 percent last week for a sixth straight weekly gain. Temperatures may be average or higher than usual in the eastern and southern U.S. this week after below-normal readings through tomorrow, according to WSI Corp. in Andover, Massachusetts.

MSCI’s Emerging Markets Index was little changed, erasing an earlier 0.3 percent drop triggered after a survey showed Chinese manufacturing expanded less than estimated. The Shanghai Composite Index fell 1.6 percent, retreating for a fifth day. Benchmark indexes in Israel, Argentina, Turkey, Russia, Hungary and the Czech Republic each rallied more than 1 percent.

The Ukrainian PFTS stock index slipped 1.9 percent. Ukraine is in talks with Russia for a loan of as much as $15 billion as President Viktor Yanukovych prepares to head to Moscow after a weekend of mass protest in Kiev, two people familiar with the negotiations said.

Taiwan’s TAIEX gauge slid 0.8 percent and the Hang Seng China Enterprises Index lost 0.9 percent. Dubai’s DFM General Index declined 1.6 percent, slipping from its highest level since October 2008.

Before it's here, it's on the Bloomberg Terminal.