U.S. Stocks Advance as Central-Bank Bets Drive Currency Markets

  • S&P 500 nears record amid earnings while oil slump continues
  • Asian index futures mixed amid countdown to BOJ review

Mobius: Fed to Be ‘Very Cautious' Before Raising Rates

U.S. stocks rose, lifting the S&P 500 Index to within striking distance of an all-time high, as investors digested company earnings ahead of data due Friday on the American economy. Stimulus bets colored currency trading ahead of the Bank of Japan’s policy review.

The S&P 500 staged an afternoon comeback to end five points below its record after falling as much as 0.4 percent earlier in the session. Earnings from Ford Motor Co. to Facebook Inc. tugged indexes in opposite directions, while shares of Google’s parent Alphabet Inc. surged more than 5 percent in extended trading after its profit topped estimates. The dollar weakened and the yen erased gains before the BOJ’s statement Friday, as pound slid on bets the Bank of England will lower interest rates next week. U.S. oil neared $41 a barrel.

Currencies from the yen to the pound have been whipsawed this week amid speculation over stimulus moves from central banks. Traders will get more intelligence over the next 24 hours, with Japanese policy makers expected to expand their already unprecedented support program and Europe to release results of the latest stress tests for banks. Investors will also get a first read on U.S. gross domestic product in the second quarter later on Friday.

“People are waiting for a catalyst to get us moving again,” John Stoltzfus, chief market strategist at Oppenheimer & Co. in New York, said by phone. “People are waiting to see what’s next in line. The market is digesting all the activity it’s had to face from a geopolitical point of view, a macro economic point of view as well as digesting this current earnings season.”

Stocks

The S&P 500 rose 0.2 percent to 2,170.06 as of 4 p.m. in New York, leaving it 0.2 percent below the 2,175.03 all-time high set July 22.

While the U.S. benchmark has added more than 3 percent in July, it’s been in a rare holding pattern for the past two weeks. Since the S&P 500 hit its fourth straight record on July 14, the gauge has alternated between gains and losses, finishing every day less than 0.5 percent from the previous closing level. The 10-day streak is the longest since data began in 1927.

Though the prospect of additional central-bank support has bolstered equities, better-than-forecast economic data and corporate earnings that have broadly beaten projections have also helped boost the S&P 500 this month. The gauge posted seven records in 10 days in a mid-month stretch, and it’s rebounded 18 percent since its low in February. It’s up 6 percent this year -- one of the best gains in developed-world equities.

Ford sank 8.2 percent after earnings missed estimates, while General Motors Co. dropped 3.2 percent. Whole Foods Markets Inc. sank 9 percent on poor results, as Facebook climbed to a fresh record on sales that topped analysts’ forecasts. MasterCard Inc., the second-largest U.S. payments network, advanced for a third day after saying profit rose 6.7 percent as customer card spending increased.

In after-market trading, A-class shares of Alphabet jumped 5.5 percent after the Internet search giant exceeded estimates for sales and earnings. Amazon.com Inc. also climbed in extended trading, adding about 2.1 percent after it projected third-quarter revenue that beat analysts’ estimates.

The Stoxx Europe 600 Index slid 1 percent, leaving it 2 percent below its June 23 level, the day of the U.K.’s EU referendum. American and Asian shares have already recovered their Brexit losses. Banks fell the most among Stoxx 600 industry groups, with Banca Popolare di Milano Scarl, Deutsche Bank AG and Banco Popular Espanol SA down more than 3 percent ahead of the stress-test results.

Futures on Japan’s Nikkei 225 Stock Average jumped 1.1 percent in Osaka, while falling in Chicago as the yen meandered ahead of the BOJ’s decision. Contracts on stock gauges in Hong Kong fell at least 0.8 percent, while those on Australia’s S&P/ASX 200 Index rose 0.2 percent.

Currencies

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, lost 0.1 percent in a third day of declines.

Against the euro, the U.S. currency capped its biggest two-day slide since June. The euro fell 0.2 percent to $1.1077, while the yen was little changed at 105.27 per dollar after gaining as much as 0.9 percent earlier in the session. A majority of economists polled by Bloomberg predict the BOJ will boost asset purchases on Friday and lower the already negative key benchmark rate.

The pound slipped against 14 of its 16 major counterparts with swaps trading indicating that the BOE is certain to cut key interest rates next week. Sterling dropped 0.5 percent on Thursday to $1.3164.

Commodities

Oil fell to a three-month low, edging closer to a bear market, after U.S. crude supplies unexpectedly rose from what was already the highest seasonal level in at least two decades. West Texas Intermediate crude decreased 1.9 percent to settle at $41.14 a barrel, while Brent slipped 1.8 percent to $42.70.

Oil is nearing a 20 percent drop from levels reached in early June, a move that would characterize a bear market. The recovery driven by supply disruptions that saw prices almost double from a 12-year low reached in February has petered out amid renewed concerns about the strength of demand.

“There is still a surplus and the oil price is going to have difficulty sustaining any rally because of that,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “We’re now heading toward the end of the drive season and the market is probably going to weaken further. The $40 a barrel level looks like the base at the moment.”

Platinum is up 11 percent in July, putting prices on track for the best month since 2012. Palladium is even better, jumping 17 percent, the most since 2008. By comparison, gold added less than 2 percent in July as it lost momentum after gains in the first half.

Platinum futures for October delivery rose 1 percent Thursday to settle at $1,138.90 an ounce, while gold futures climbed 0.5 percent to settle at $1,341.20 an ounce.

Bonds

Treasuries declined for the first time in three days, pushing 10-year yields up one basis point, or 0.01 percentage point, to 1.51 percent. Yields slid on Wednesday by the most since July 5 after the Fed kept rates on hold and reiterated its gradual approach to tightening policy going forward.

U.S. government debt has rallied about 5 percent in 2016 as the Fed held off on raising rates after liftoff from near zero in December, while central banks in Japan and Europe maintained record stimulus.

The default rate for leveraged loans in the energy sector could spike close to 18 percent if Templar Energy LLC and Stallion Oilfield Services Ltd. are unable to make interest payments on their debt, Fitch Ratings said.

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