Dow Average Tops 13,000 on Confidence Data as Euro Rises Before ECB Loans
U.S. stocks climbed, sending the Dow Jones Industrial Average to its first close above 13,000 since 2008, as confidence jumped to a one-year high and oil retreated for a second day. The euro gained before the European Central Bank provides funds tomorrow to support banks.
The Dow added 23.61 points, or 0.2 percent, to 13,005.12 and the Standard & Poor’s 500 Index (SPX) closed up 0.3 percent to 1,372.18 at 4 p.m. in New York. The euro strengthened 0.5 percent to $1.3471, near its highest level of the year. Ten-year Treasury yields increased one basis point to 1.93 percent. Oil sank 1.9 percent to $106.55 a barrel after yesterday halting a seven-day gain, its longest since January 2010. Apple Inc. rallied after U.S. exchanges closed, rising to a price that would give it a $500 billion market value.
Equities reversed an early drop triggered by a bigger-than- forecast decrease in durable goods orders. The Conference Board’s consumer-confidence index increased more than forecast to 70.8. European banks will probably tap the ECB for 470 billion euros ($632 billion) in three-year funds in its long- term refinancing operation, according to a Bloomberg News survey of analysts.
“The market climbs a wall of worry,” Richard Weeks, the Vienna, Virginia-based managing director and partner at HighTower’s VWG Wealth Management. His firm oversees more than $20 billion. “I don’t have rose-colored glasses on, but I think the path of least resistance is up. Short-term, all signs say that risks have been reduced.”
Technology and consumer-discretionary companies led gains among seven of the 10 main industry groups in the S&P 500 today, rising at least 0.7 percent. Microsoft Corp., Intel Corp. and Johnson & Johnson led gains in the Dow, rising more than 1 percent each. The 30-stock Dow had also climbed above 13,000 during three sessions in the past week, only to end the sessions below the milestone.
Apple Inc. added 1.8 percent and its market capitalization approached $500 billion as people familiar with the matter said it will introduce a new iPad next month. Micron Technology Inc. rose 3.7 percent after buying Intel Corp.’s stake in two wafer factories as the companies expand their venture. Priceline.com Inc. surged 7 percent to the highest since 1999 as profit beat estimates.
U.S. stock-index futures erased gains before the open of exchanges in New York after the durable goods report. Bookings for goods meant to last at least three years slumped 4 percent, according to data from the Commerce Department. Economists projected a 1 percent decline, according to the median forecast.
The S&P GSCI Index of commodities decreased 1.2 percent as natural gas and gasoline retreated 2.7 percent, overshadowing a 4.1 percent rally in silver, zinc, corn, cotton and wheat.
Thirty-year Treasury bonds erased early gains, sending yields up two basis points to 3.07 percent. Two-year yields were little changed at 0.29 percent. Ten-year yields earlier slid as low as 1.89 percent, the first dip below 1.9 percent since Feb. 7.
“We’ve had a decent run in Treasuries since last week, and the market is taking its breath around 1.9 percent as it is an important technical level that is hard to breach with no new news, and risk markets performing the way they have,” Anthony Cronin, a Treasury trader at Societe General in New York, one of the 21 primary dealers that trade with the Federal Reserve, said in a telephone interview.
The Fed bought $4.95 billion in debt due from May 2020 to February 2022 today as part of its plan to boost the economy. Fed Chairman Ben S. Bernanke is forecast to retain a cautious outlook on the economy when he gives his semi-annual monetary policy report to House lawmakers tomorrow and the following day to senators.
Gross on Defense
Pacific Investment Management Co.’s Bill Gross said investors should embrace a defensive strategy because of the limits of zero-bound interest rates and systemic debt risk in global financial markets.
Gross told investors to emphasize income, de-emphasize derivative structures that are fully valued and be willing to accept returns lower than historical averages. The period of muted growth in developed economies, high unemployment and orderly deleveraging Pimco dubbed the “new normal” in the aftermath of the 2008 financial crisis is morphing into a world of credit and zero-bound interest-rate risk, Gross said last month.
“An instant replay of these past few decades would have shown that accelerating asset prices weren’t due to any particular wisdom on the part of academia or the investment community but an offensively minded Federal Reserve and their global counterparts who were printing money, lowering yields and bringing forward a false sense of monetary wealth that was dependent on perpetual motion,” Gross wrote in a commentary posted on Newport Beach, California-based Pimco’s website today.
The Stoxx Europe 600 Index (SXXP) increased 0.2 percent as commodity producers and technology companies led gains among 19 groups.
KBC Groep NV rallied 4.7 percent after Banco Santander SA agreed to buy the Belgian lender’s Polish unit, Kredyt Bank SA. National Bank of Greece SA dropped 6.7 percent as the shares of lenders retreated. TomTom NV (TOM2) plummeted 15 percent after forecasting lower revenue.
Economic confidence in the euro area improved more than forecast in February, adding to signs the economy is stabilizing after a fourth-quarter contraction. An index of executive and consumer sentiment in the 17-nation euro area rose for a second month, increasing to 94.4 from 93.4 in January, the European Commission in Brussels said today. Economists had forecast a gain to 94, the median of 31 estimates in a Bloomberg News survey showed.
The MSCI Emerging Markets Index (MXEF) rose 1.3 percent. The BSE India Sensitive Index climbed 1.6 percent on lower oil. South Korea’s Kospi rose 0.6 percent. Hynix Semiconductor Inc., the world’s No. 2 maker of computer-memory chips, jumped 6.8 percent to a nine-month high and Samsung Electronics Co. added 1.2 percent after their Japanese competitor Elpida Memory Inc. filed for bankruptcy.
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