U.S. Indexes Rise to Records as Bond Rout Eases Ahead of the ECB

  • Draghi seen extending ECB bond-buying program on Thursday
  • Asian index futures signal more gains even as yen rebounds

U.S. Stocks Edge Towards Record, What's Next?

U.S. stock benchmarks jumped the most in a month, powering to fresh records as the bond selloff eased, fueling demand for dividend-yielding equities amid mounting speculation the European Central Bank will extend its asset-buying program.

Both the S&P 500 Index and the Dow Jones Industrial Average climbed to all-time highs as telecommunications and property stocks joined the post-U.S. election rally. Biotechnology companies tumbled the most since October after President-elect Donald Trump said he opposes of high drug prices. Treasuries advanced and bonds rose across the euro area, with 10-year German bund yields falling from their highest point in almost three weeks. Oil fell below $50 a barrel, sparking a retreat in industrial metals. Gold and the yen rose.

Expectations the ECB will prolong its bond buying beyond March provided a shot in the arm for U.S. equities, which had been struggling to extend the rally ignited by Trump’s unexpected election win a month ago. Investors are positioning for a continuation of monthly asset purchases of 80 billion euros ($86 billion) despite uncertainty in some corners of the market as European policy makers conclude two days of meetings on Thursday. Bond yields declined in all developed markets tracked by Bloomberg before the ECB’s review.

“Appetite for riskier assets is strong amid investors and nothing is stopping them from beefing up their bullish bets,” said Naeem Aslam, chief market analyst in London at Think Markets U.K. Ltd. “The major focus is that the biggest economy in the world, the U.S., is going to pick up steam on the back of Trump-economics,” he said, adding that the ECB will likely continue asst purchases as is “to keep the market calm and avoid a taper tantrum.”

Stocks

  • The S&P 500 Index jumped 1.3 percent to 2,241.35 as of 4 p.m. in New York, while the Dow Jones Industrial Average added 298 points to 19,549.62.
  • REITs and phone stocks added at least 2.2 percent, given the groups tend to rise when yields fall.
  • Health-care shares slipped 0.8 percent, the only one of 11 S&P 500 groups to retreat. Pfizer Inc. fell 1.2 percent for the steepest slide in the Dow.
  • The Stoxx Europe 600 Index added 0.9 percent as mining companies and banks rallied
  • Credit Suisse Group AG gained 6.4 percent, while Banca Monte dei Paschi di Siena SpA rose 8.7 percent after La Stampa reported Italy will ask for a 15 billion euro ESM loan for the lender, among other banks.
  • Futures on indexes from Australia to Hong Kong climbed, with contracts on Japan’s Nikkei 225 Stock Average up 0.8 percent in Osaka.

Bonds

  • Germany’s 10-year bond yields fell three basis points, or 0.03 percentage point, to 0.35 percent, after touching 0.38 percent, the highest level since Nov. 14. The government sold 2.6 billion euros out of a planned 3 billion euros of 2018 securities.
  • Italian sovereign debt securities due in a decade advanced for a second day, almost erasing losses suffered in the aftermath of Sunday’s referendum. The nation’s 10-year bond yield fell five basis points to 1.89 percent, adding to a four-basis point drop from Tuesday.
  • Portugal’s 10-year bond yield reached the lowest level since Nov. 15.
  • Yields on Treasuries due in a decade fell five basis points to 2.35 percent.
  • The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies dropped one basis point to 74 basis points, the lowes level since Nov. 9. A gauge of swaps on junk-rated companies fell to a three-month low.

Commodities

  • West Texas Intermediate crude slid 2.3 percent to $49.77 a barrel amid speculation increased production by U.S. shale producers will counter the first output cuts from OPEC in eight years.
  • Copper slipped at least 1.2 percent with nickel and zinc in London.
  • Steel rebar in China climbed with iron ore to the highest in more than two years, as reports of a crackdown on illegal plants spurred speculation that the government is stepping up supply-side reforms.
  • Gold for immediate delivery rallied for the first time this week, adding 0.3 percent to $1,172.72 an ounce.

Currencies

  • The pound dropped 0.4 percent to $1.2626 after U.K. industrial production shrank by 1.3 percent, driven by a slide in oil and gas extraction.
  • The euro gained 0.4 percent to $1.0761 as overnight volatility in the common currency versus the dollar jumped to 23 percent, the most since June 23, based on closing prices.
  • The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, slipped 0.3 percent amid gains in emerging-market and high-yielding currencies.
  • The yen strengthened 0.2 percent to 113.82 per dollar, climbing for the first time in three days.
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