Commodities Rally on Gas as S&P 500 Rises Amid Earnings

Commodities climbed the most in two months as crude oil and natural gas surged amid frigid weather along the U.S. East Coast. Emerging-market stocks rose for the first time in five days while the Standard & Poor’s 500 Index gained for a second session as companies posted earnings.

The S&P GSCI Index of 24 commodities jumped 1.1 percent by 4:42 p.m. in New York, the steepest gain since November. Gas climbed to the highest level in more than two years and West Texas Intermediate oil increased a third day. The S&P 500 Index added 0.1 percent while Netflix Inc. and EBay Inc. surged in after-hours trade after issuing results. The MSCI Emerging Markets Index rose 0.6 percent, with shares in Shanghai rising 2.2 percent after China’s money-market rates extended declines.

Cities along the U.S. East Coast shoveled streets clear after record snowfalls as temperatures plummeted following the season’s worst storm. Chinese benchmark money-market rates fell for a second day as the People’s Bank of China made more funding available for smaller lenders. The U.K.’s unemployment rate fell to 7.1 percent, the lowest level in almost five years. More than 20 companies in the S&P 500 reported results today.

“It hasn’t been a blockbuster earnings season, but if you look at earnings surprises, they are kind of on par with what you’ve seen historically,” Dan Morris, who helps oversee about $564 billion as global investment strategist at TIAA-CREF Asset Management in New York, said in a phone interview. “We’re not seeing a big reason for things to go badly, but want to be convinced there is a reason for the market to rally further.”

Netflix, EBay

Shares of Netflix soared about 17 percent in after-hours trading as the company reported a fourth-quarter profit of 79 cents-a-share, exceeding the median analyst estimate of 66 cents. EBay’s adjusted earnings-per-share of 81 cents beat the median estimate of 80 cents. The stock rose more than 9 percent after market as EBay said investor Carl Icahn was nominated to its board and is proposing spinning off Paypal.

U.S. natural gas surged 5.8 percent for a second day of gains. The low in New York today may be 8 degrees Fahrenheit (minus 13 Celsius), according to AccuWeather Inc. MDA Weather Services predicted colder-than-usual readings in the eastern half of the U.S. through Jan. 31.

West Texas Intermediate crude climbed 1.9 percent to $96.73 a barrel, the third consecutive daily advance and the longest rally since Dec. 27, amid speculation U.S. government data will show inventories of distillate fuel fell as heating demand gained.

U.S. Movers

Six of 10 industry groups in the S&P 500 rose as industrial, energy and consumer-discretionary shares posted the biggest gains. Telephone and raw-materials companies had the steepest losses, dropping at least 0.7 percent.

Coach Inc., the largest U.S. luxury handbag maker, fell 6 percent after reporting fiscal second-quarter profit that trailed analysts estimates. International Business Machines Corp., the world’s biggest computer-services provider, dropped 3.2 percent, helping drag the Dow Jones Industrial Average down 0.3 percent, after posting its seventh straight quarterly sales decline. Norfolk Southern, the second-largest U.S. eastern railroad, climbed 4.8 percent as profit exceeded projections.

The Dow is diverging from the S&P 500 by the most in more than two years amid weaker results from companies such as Johnson & Johnson and IBM. The average difference between their performance in the past three days has been 0.5 percentage point, the most since October 2011.

Equity Valuations

Of the 86 S&P 500 members that have posted results so far this season, 70 percent have beaten estimates for profit and 65 percent have exceeded sales projections, according to data compiled by Bloomberg.

A five-year rally that lifted the S&P 500 up more than 170 percent from a bear-market low has boosted equity valuations to near the highest level since 2009. The S&P 500 trades at 15.6 times the estimated earnings of its members, more than the five-year average multiple of 14.1, data compiled by Bloomberg show.

“If we as a country, we as a world, stay in the muted economic growth we’ve experienced in the past two years, the market probably can’t support the valuations here,” David Chalupnik, head of equities at Nuveen Asset Management in Minneapolis, said in a phone interview. His firm manages about $120 billion. “We need better economic numbers and we need earnings to follow that.”

The IMF forecast the global economy will expand 3.7 percent this year, compared with an October estimate of 3.6 percent. Growth for China was revised to 7.5 percent from a previous projection of 7.3 percent.

‘Stabilized Rates’

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong increased 1.1 percent. Money-market rates slid for a second day after China’s central bank added more than $42 billion to the financial system to meet Lunar New Year cash demand. The nation’s markets are closed from Jan. 31 to Feb. 6.

“The PBOC’s actions yesterday stabilized interbank rates and caused Chinese equities to rally,” Michael Wang, an emerging-markets strategist at Amiya Capital LLP in London, said by e-mail. The International Monetary Fund upgraded its outlook for global growth yesterday and that “is helping sentiment,” he said.

Ukraine’s benchmark index dropped 1.7 percent and yields on the country’s dollar-denominated bonds due in June jumped 211 basis points, or 2.11 percentage points, to 8.22 percent amid a third night of street violence in Kiev. Two dead bodies were found at a medical point set up by protesters in the capital, according to Interior Ministry spokesman Serhiy Burlakov. Reports that a 22-year-old activist died in a hospital after being beaten and falling are being investigated, he said today.

European Markets

Thailand’s SET Index lost 0.2 percent. The government declared a state of emergency in Bangkok yesterday that bans gatherings of more than five people, allows detention without charge and gives soldiers immunity from prosecution. Thailand unexpectedly kept its key interest rate unchanged today.

The Stoxx Europe 600 Index added 0.1 percent, closing at its highest level since 2008 after rallying 2.4 percent this month. The U.K.’s unemployment rate approached the 7 percent threshold at which the Bank of England says it will review borrowing costs.

ASML Holding NV rose 7 percent today after Europe’s largest semiconductor-equipment supplier said it plans to raise its 2013 dividend by 15 percent. Rautaruukki Oyj soared 33 percent after SSAB AB said it plans to buy the Finnish steelmaker.

Pound, Aussie

ABB Ltd. retreated 3.6 percent after saying charges from project delays and operational issues will hurt profit. Allianz SE lost 1.2 percent after Europe’s largest insurer said Mohamed El-Erian resigned from Pacific Investment Management Co. Allianz is the parent of Pimco.

The pound gained 0.7 percent per euro and 0.6 percent against the dollar. The yield on 10-year gilts climbed five basis points to 2.89 percent.

Australia’s dollar strengthened against all but one of its 16 major counterparts, rising from a three-year low of 87.57 U.S. cents reached Jan. 20. Australian consumer prices rose faster than economists predicted, limiting the central bank’s scope to cut interest rates.

The yen fluctuated after the Bank of Japan refrained from signaling additional stimulus following a two-day policy meeting that ended today. The currency weakened 0.2 percent to 104.49 per dollar and was little changed at 141.54 per euro.

Bond Yields

Spanish bonds were also steady. The government sold a record amount of debt via banks after a rally in bonds from Europe’s most indebted nations pushed its borrowing costs to the lowest in seven years. The 10-year Spanish yield gained less than one basis point, after earlier falling six basis points, to 3.73 percent.

Ten-year Treasury yields increased three basis points to 2.86 percent, climbing from almost a six-week low as signs the U.S. recovery is accelerating boosted speculation the Federal Reserve will keep reducing its debt-purchase program. Fed policy makers meet next week after voting in December to trim bond buying by $10 billion a month.

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