Stocks, Commodities Advance as Dollar Index Retreats; Treasuries Decline
U.S. stocks rose and commodities erased losses, while the Dollar Index retreated, as riskier assets recovered from an early slump amid speculation that recent declines were excessive. Treasuries slid after an auction of 30-year bonds drew the weakest demand in six months.
The Standard & Poor’s 500 Index advanced 0.5 percent to 1,348.65 at 4 p.m. in New York after slumping as much as 0.8 percent. The S&P GSCI Index of commodities climbed less than 0.1 percent after tumbling as much as 2.3 percent. Sugar, hogs and soybeans led gains and oil rose 0.8 percent to $98.97 a barrel. The Dollar Index, which tracks the currency versus six major peers, lost 0.2 percent to reverse an early gain. Yields on 30- year Treasuries rose four basis points to 4.35 percent.
Declines in energy and raw material prices yesterday and early today threatened to wipe out a two-day rebound in the S&P GSCI Index from last week’s 11 percent slump, its worst since 2008. Shares of oil and mining companies dragged the S&P 500 last week to its biggest drop since March. Steven A. Cohen, the billionaire founder of hedge fund SAC Capital Advisors LP, said the sell-off in commodity markets makes this a good time to buy stock in energy companies.
“We’re seeing a reversal of the trend of commodities taking a hit as the dollar rises,” said Michael Nasto, senior trader at U.S. Global Investors Inc., which manages about $3 billion in San Antonio. “There was nothing fundamental about what happened over the last few days. It was just a reversal of a trend. The economic recovery is in place and there will be demand for commodities and riskier assets.”
ETF Fund Flows
The U.S. Oil Fund and Market Vectors Agribusiness ETF attracted more money than any other U.S. exchange-traded fund in the past week following the biggest retreat in commodity prices in more than two years.
The ETF that tracks the price of oil drew $514.4 million in the past week, according to data from New York-based research firm XTF Inc. The agriculture fund, which tracks the share prices of 46 companies such as Deere & Co. and Syngenta AG, got $500.9 million, the data show.
Investors “are not yet willing to give up on the weak dollar and inflation trade,” said Nicholas Colas, the New York- based chief market strategist at BNY ConvergEx Group LLC. “They are cycling into agriculture and energy-oriented investments, even though the price action is choppy.”
Energy is “an interesting sector,” SAC’s Cohen said yesterday at the SALT, or SkyBridge Alternatives, Conference in Las Vegas. “I think that energy stocks are discounting oil prices much lower than where we are trading today.”
The S&P GSCI commodity gauge had rallied 20 percent and the S&P 500 had risen 8.4 percent before last week’s rout. Earlier losses in stocks today came after China moved to curb lending and Cisco Systems Inc. (CSCO) forecast earnings that trailed analysts’ estimates.
International Business Machines Corp., Merck & Co. and Coca-Cola Co. climbed at least 1.5 percent to lead gains in 21 of 30 stocks in the Dow Jones Industrial Average today.
Freeport-McMoRan Copper & Gold Inc. and Schlumberger Ltd. rose, reversing declines. Symantec Corp. (SYMC), the world’s biggest maker of security software, climbed 5.2 percent after forecasting higher revenue than analysts estimated. Tyson Foods Inc. added 4.6 percent after the biggest U.S. meat processor announced a stock buyback.
Goldman Sachs Drops
Goldman Sachs Group Inc. (GS) declined the most since January, losing 3.5 percent. Richard X. Bove, analyst at Rochdale Securities LLC, told investors to sell the stock on concern that the Department of Justice faces growing pressure to bring claims against the firm.
Treasuries extended losses after the government’s $16 billion sale of 30-year bonds. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount offered, was 2.43, the least since November and down from an average of 2.7 at the past 10 sales. The bonds drew a yield of 4.38 percent, compared with an average forecast of 4.343 percent in a Bloomberg News survey of eight of the Federal Reserve’s 20 primary dealers. The sale was the final of three auctions this week totaling $72 billion.
In economic data, the Labor Department said jobless claims fell to 434,000 in the week ended May 7, compared with 430,000 claims forecast in a Bloomberg survey. Other reports showed the producer price index increased 0.8 percent, more than estimated, while retail sales increased 0.5 percent, the slowest pace since July.
The Stoxx Europe 600 Index slid 0.7 percent, the biggest drop in a week. Losses were led by energy and basic-resources companies, with European exchanges closing before the rebound in commodities.
Emerging Markets Slump
The MSCI Emerging Markets Index fell 1.5 percent, heading for the lowest close since March 29. China’s Shanghai Composite Index retreated for a second day, losing 1.4 percent. South Korea’s Kospi Index sank 2 percent, the biggest drop since March 15. Russia’s Micex Index lost 1.5 percent.
Global investors have tempered their optimism about the U.S. and world economies and plan to put more of their money in cash and less in commodities over the next six months, a Bloomberg survey found.
Almost one in three of those questioned say they will hold more cash, while 30 percent intend to reduce investments in commodities, according to a quarterly Bloomberg Global Poll of 1,263 investors, analysts and traders who are Bloomberg subscribers. Both results were the highest since the survey began asking the question last June.
A plurality -- 40 percent -- expects oil prices to fall in the next six months, the first time respondents felt that way since the inception of this poll in July 2009.
Most global investors predict China’s yuan will be convertible into other currencies by 2016, with 50 percent seeing it joining the dollar, yen and euro as a reserve currency within a decade, the Bloomberg poll indicated.
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