S&P 500 Surpasses Record on Data, Gold Sinks on Rate BetsJeremy Herron and Oliver Renick
The Standard & Poor’s 500 Index rose to a record, while oil advanced with bonds, amid optimism the Federal Reserve is committed to supporting a strengthening economy. Gold sank to a two-month low.
The S&P 500 added 0.3 percent at 4 p.m. in New York for a fourth day of gains, its longest streak since June. Emerging-market equities fell 0.4 percent from a three-year high, while the Stoxx Europe 600 Index advanced 0.7 percent to the most this month. Ten-year Treasury yields retreated for the first time in four days. Gold dropped, while the dollar erased gains and oil climbed.
Data from housing to employment and manufacturing bolstered optimism that growth in the world’s largest economy is accelerating a day after minutes from the Federal Reserve’s last meeting reinforced the central bank’s commitment to supporting the recovery. Chair Janet Yellen speaks on the labor market tomorrow as investors look for clues on the timing of higher interest rates.
“The market is really in a sweet spot for U.S. stocks, fundamentals continue to be very good,” Jeff Kravetz, the Phoenix-based regional investment director at US Bank’s Private Client Reserve, said via phone. “This Jackson Hole meeting is going to be about labor and Yellen is an expert on labor. That would bode for more dovish comments as she’s said repeatedly the labor market, despite employment, hasn’t come in where they need it to be.”
The S&P 500 has rebounded 4.3 percent from a three-month low on Aug. 7 as investors speculated central banks won’t raise rates sooner than anticipated. Almost $900 billion has been restored to American equity values since early August as the gauge surged to within six points of 2,000.
While a report today showed fewer Americans than forecast applied for unemployment benefits last week, weak wage growth and low inflation have given the Fed room to hold rates near zero. Yellen will provide her take on the latest labor data in a keynote speech tomorrow at a symposium in Jackson Hole, Wyoming.
Fed policy makers last month debated how much slack remains in labor markets, and came closer to an agreement on how to exit from stimulus, the minutes showed.
The Fed is on pace to end its monthly bond purchases in October, and plans to keep rates low for a “considerable time” after that. Some participants “were increasingly uncomfortable” with the committee’s forward guidance on rates, the minutes showed.
The prospect of rates rising sooner than estimated sent gold to a two-month low and briefly boosted the dollar to an 11-month high versus the euro.
Gold futures slid 1.5 percent to settle at $1,275.40 in New York. The metal earlier reached $1,273.4, its lowest price since June 18.
The dollar fell 0.2 percent to $1.3280 per euro after appreciating to $1.3242, the strongest level since Sept. 10. The greenback was at 103.81 yen after advancing to 103.96, the highest since April 4.
Treasuries rose for the first time in four days, sending the yield lower by two basis points to 2.41 percent. The benchmark rate climbed earlier to a one-week high.
West Texas Intermediate oil for October delivery advanced 0.5 percent to settle at $93.96 a barrel in New York as U.S. data pointed to stronger growth in the world’s biggest oil-consuming nation.
Reports today showed existing home sales rose to the most since September and the Conference Board’s gauge of the outlook for the next three to six months increased 0.9 percent in July. The Markit Economics preliminary August index of U.S. manufacturing jumped to the highest since April 2010.
“The thesis for the second half is better growth,” Krishna Memani, the New York-based chief investment officer at OppenheimerFunds, said by phone. “The expectation for tomorrow is that Yellen is not going to say anything dramatic that’s going to be different from what she’s said before.”
Among stocks moving, Bank of America Corp. gained 4.2 percent, the most since May 2013. The bank agreed to pay $245 million to settle U.S. Securities and Exchange Commission allegations that it failed to disclose rising mortgage losses and the risks of bonds tied to home loans.
EBay Inc. jumped 4.7 percent, the most since January 2013, after The Information reported the company may spin off its PayPal payment unit as soon as next year.
European Central Bank President Mario Draghi will also speak in Jackson Hole tomorrow, amid increasing speculation the bank will opt for more stimulus. Data today showed Markit’s euro-area manufacturing and services indexes slowed in August.
Draghi said this month policy makers have intensified preparation to buy asset-backed securities. In June, the bank introduced targeted long-term refinancing operations to improve bank lending in the non-financial private sector.
“The European economy is not falling off the rails but it could use a little bit of a push,” Ben Kumar, an investment manager who helps manage $7 billion at Seven Investment Management LLP in London, said by phone. “This leaves room for stimulus which is making investors more optimistic.”
The Norwegian krone gained against all 16 of its major counterparts after a report showed the nation’s economy grew 1.2 percent in the three months through June, double the 0.6 percent rate forecast by economists. The currency appreciated 0.6 percent to 6.1563 per dollar and 0.6 percent to 8.1660 per euro.
The MSCI Emerging Markets Index slid 0.4 percent, falling for the first time in nine days. Norway’s $880 billion sovereign wealth fund, the world’s largest, is slowing its expansion into emerging markets as it scales back a two-year mission to tap into the fastest growing markets.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong lost 1 percent, its biggest drop in a week. The Shanghai Composite Index fell 0.4 percent.
The preliminary purchasing managers’ index from HSBC and Markit Economics was at 50.3 in August, missing the 51.5 median estimate of analysts. Numbers above 50 indicate expansion.
Russia’s Micex Index advanced for a 10th day, its longest rally since September 2005. The gauge climbed 1 percent, extending its rally this month to 6 percent. The ruble slipped less than 0.1 percent against the dollar and the hryvnia weakened for a third day, slipping 1.2 percent.
President Vladimir Putin will take part in an Aug. 26 meeting in Belarus attended by his Ukrainian counterpart Petro Poroshenko, the Russia government said Aug. 19.