Stocks Rise as Syria Concerns Ease While Treasuries Rally
U.S. stocks rose, sending the Standard & Poor’s 500 Index to a seventh straight gain, after President Barack Obama asked Congress to delay a vote authorizing a military strike against Syria. Treasuries rallied as a $21 billion auction drew the highest demand in six months.
The S&P 500 rose 0.3 percent to an almost one-month high of 1,689.13 at 4 p.m. in New York, with a plunge in Apple Inc. shares limiting its gain, while the Stoxx Europe 600 Index jumped to a five-year high. Treasury 10-year yields slid six basis points to 2.91 percent while the dollar was weaker versus the euro and yen. The British pound jumped 0.6 percent to $1.5824 as a report showed unemployment decreased. Oil rose 17 cents to $107.56 a barrel as stockpiles at Cushing, Oklahoma, decreased to the lowest level since February 2012.
Obama asked Congress to delay a vote on Syria while the administration pursues a proposal that would have the nation surrender its chemical arms, he said last night in a speech in Washington. The U.K’s unemployment rate measured by International Labour Organization methods declined to 7.7 percent from 7.8 percent in the second quarter, the Office for National Statistics said. The Federal Reserve’s policy committee meets next week to decide whether to reduce its monthly bond purchases.
“We’re not out of the woods on news from Syria yet, but for the time being the market has digested the decision to delay action,” Russell Croft, who helps manage $900 million as a Croft-Leominster Inc. fund manager in Baltimore, said by phone. “Right now all eyes are on next week’s Fed meeting, that’ll be the big driver in the market with a few datapoints between now and then.”
International Business Machines Corp. surged 2.2 percent after agreeing to sell its customer-care outsourcing business to Synnex Corp. for $505 million. Marriott International Inc. increased 3.2 percent after a Chinese land developer said he wants to buy hotel-management companies in the U.S. Apple plunged 5.4 percent, extending its two-day slump to 7.6 percent, as the price of its new lower-cost iPhone disappointed analysts.
Economists estimate the Fed this month will taper its monthly bond buying by $10 billion, to $75 billion, according to the median of 34 responses in a Bloomberg News survey. The stimulus has helped the S&P 500 (SPX) rally as much as 153 percent since the beginning of the bull market in March 2009 through its last record on Aug. 2.
The S&P 500 traded yesterday above its 150-day moving average for the 200th straight session. That’s the sixth longest streak since 1980 and the longest since 2004, according to Miller Tabak & Co.’s Jonathan Krinsky. In five prior instances, after crossing the 200-day mark, further gains were “rather limited” during four runs, while in the 1995-1996 streak, the S&P 500 rose another 15 percent, Krinsky wrote.
Speculation about the stimulus has whipsawed stocks since May, when Chairman Ben S. Bernanke first indicated cuts could start this year. The S&P 500 tumbled 5.8 percent from a record high on May 21 through June 24. It rebounded 8.7 percent to close at its latest all-time high of 1,709.67 on Aug. 2. The gauge then slumped as much as 4.6 percent before the current rally brought it back to within 1.3 percent of the record and above the May 21 peak.
Stanley Druckenmiller, who boasts one of the hedge-fund industry’s best long-term track records of the past three decades, said ending the bond buying over the next year will roil markets.
“I really don’t care whether we go to $70 billion or $65 billion in September,” Druckenmiller said today in an interview with Bloomberg Television. “But if you tell me quantitative easing is going to be removed over nine or 12 months, that is a big deal.”
Treasuries advanced after demand at the U.S. auction of $21 billion in 10-year notes increased to the highest level since March. The securities yielded 2.946 percent, trailing a forecast of 2.964 percent in a Bloomberg News poll of eight of the Fed’s primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount sold, was 2.86, versus 2.45 at the last sale and an average of 2.73 at the past 10.
Treasuries briefly erased gains before the auction as traders bet the sale of a record $49 billion in corporate bonds by Verizon Communications Inc. (VZ) would lead to the unwinding of hedges used to guard against higher yields. Verizon, the second-biggest U.S. telephone carrier, sold the offering in eight parts. The transaction tripled the size of Apple’s record $17 billion issue in April.
The Stoxx Europe 600 Index rose 0.3 percent as utilities and automobile companies led gains. Trading volume was 23 percent greater than the 30-day average, according to data compiled by Bloomberg.
ARM Holdings Plc (ARM), which designs chips for Apple Inc. (AAPL)’s iPhones, rallied the most in four months after the U.S. company unveiled two new models of the device. EON SE and RWE AG surged more than 4 percent, leading a gauge of utilities higher. Kingfisher Plc retreated 2.7 percent after first-half pretax profit missed analysts’ estimates.
The MSCI Emerging Markets Index rose for a sixth day, climbing 0.2 percent and reaching a three-month high. The Shanghai Composite Index gained 0.2 percent while the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong decreased 0.6 percent.
The foundations of a rebound aren’t yet solid and China is taking steps to stabilize growth and can achieve the main economic targets this year, Premier Li Keqiang said in a speech today at the World Economic Forum in Dalian, China.
India’s rupee strengthened 0.8 percent versus the dollar and Russia’s ruble added 0.6 percent. The euro rose 0.3 percent to $1.3311, climbing for a fourth day. The yen appreciated 0.5 percent to 99.86 per dollar.
Italy’s 10-year bond yields were above those of Spain for a second day, after rates surpassed those on the Iberian securities yesterday for the first time in 18 months amid speculation a vote on whether to expel Silvio Berlusconi from Italy’s Senate will destabilize the coalition government.
The Italian yield fell less than one basis point to 4.53 percent. Spain’s decreased three basis points to 4.49 percent.
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