U.S. Stocks, Dollar Rise in Sign of Resilience: Markets Wrap

  • Dow average approaches 20,000, Nasdaq sets new intraday high
  • Yen leads declines versus dollar as BOJ maintains stimulus

El-Erian on the Dow's March Towards 20,000

U.S. stocks rose with equities in Europe, while bonds and gold retreated in a demonstration of financial markets’ resilience to recent geopolitical events as investors focus on the prospects for increased government spending in the U.S.

The Dow Jones Industrial Average closed at a record after rallying within 13 points of 20,000. The Stoxx Europe 600 Index reached its highest level of the year. Treasuries and gold reversed gains from Monday following a probable terror attack in Berlin and the killing of Russia’s envoy to Turkey. The yen approached the weakest since February versus the dollar after Japan’s central bank kept its yield-curve and asset-purchase programs unchanged.

Markets have showed increasing immunity to terror incidents this year, with initial reactions to buy haven assets after attacks fading quickly. As trading volumes decrease before December holidays and year-end, investors may be loath to veer too far from the underlying market trends that have prevailed since the election of Donald Trump in November, namely favoring stocks and shunning bonds. A so-called fear gauge of volatility in European stocks was at the lowest since 2014.

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“The market response to each new terror event is less and less pronounced,” said Mike van Dulken, head of research at Accendo Markets. The move in European stocks “confirms ever-thickening investor skin.”

Stocks

  • The S&P 500 Index rose 0.4 percent to 2,270.71 at 4 p.m. in New York, a point below its all-time high. The Dow rose 90.54 points to close at 19,973.60, a record.
  • Trading in S&P 500 and Dow stocks was at least 20 percent lower than the 30-day average as investors prepare for the Christmas holiday.
  • Caterpillar Inc. and Nike Inc. led advances in the blue-chip gauge. Bank shares resumed a rally, adding 0.9 percent.
  • The Stoxx Europe 600 Index rose 0.5 percent, for the highest close in 2016. Analysts are upbeat about profit at its members next year, expecting earnings to grow 12.5 percent.

Currencies

  • The Bloomberg Dollar Spot Index resumed its rally, pushing its gain in the quarter toward 8 percent, the biggest three-month advance since the third quarter of 2008.
  • The euro pared losses versus the dollar after plumbed another 2003 low at $1.0352. It was down 0.1 percent at 103.91.
  • The yen fell 0.6 percent to 117.80 per dollar. 

Bonds

  • Treasuries slumped with European debt, erasing most of Monday’s gains.
  • Yields on 10-year Treasury notes climbed two basis points to 2.56 percent after dropping five basis points on Monday.
  • German bunds of the same maturity fell, sending yields higher by two basis points to 0.26 percent.

Commodities

  • Gold closed near a 10-month low as the dollar climbed and concerns eased over geopolitical events that had briefly supported the price. Futures for February delivery fell 0.8 percent to $1,133.60.
  • Copper rebounded from the lowest in almost month after London Metal Exchange data showed a drop in copper stockpiles for the first time in seven days. The metal settled 0.1 percent higher at $2.5025 a pound in New York.
  • Oil was little changed and closed near $52 a barrel as Libya said it reopened two oil fields while analysts project government data to show U.S. crude stockpiles fell for a fifth week.

— With assistance by Natasha Doff, Cecile Gutscher, Ramy Inocencio, and Aleksandra Gjorgievska

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