BLBG: U.S. Markets Wrap: S&P 500 Hits 10-Month High, Treasuries Drop
Aug. 21 (Bloomberg) -- U.S. stocks gained for a fourth day, sending the Standard & Poor’s 500 Index to the highest level since October, after U.S. existing home sales jumped to the highest level in almost two years. The dollar and Treasuries fell, while oil rose to a 10-month high.
Exxon Mobil Corp., General Electric Co. and JPMorgan Chase & Co. added more than 1.9 percent. D.R. Horton Inc. and Pulte Homes Inc. climbed as the National Association of Realtors said home sales increased 7.2 percent in July, exceeding the median economist forecast. Ten-year Treasury yields rose from their lowest levels in five weeks as Federal Reserve Chairman Ben S. Bernanke said the global economy is “beginning to emerge” from recession.
The S&P 500 added 1.9 percent to 1,026.13 at 4 p.m. in New York, giving it a 2.2 percent advance this week. The Dow Jones Industrial Average gained 155.91 points, or 1.7 percent, to 9,505.96. Europe’s Dow Jones Stoxx 600 Index rose 2.3 percent, the most since July 15, to 234.85, after services in Germany and manufacturing in France unexpectedly expanded.
“This housing data is another good piece of news,” said John Kornitzer, who oversees about $5 billion at Kornitzer Capital Management in Shawnee Mission, Kansas. “Everybody is waiting for the economy to turn up, and everybody doesn’t want to miss it.”
Home Prices Fall
Home purchases climbed to a 5.24 million annual rate in July, the most since the financial crisis began in August 2007. The 7.2 percent rise was the biggest since records began in 1999. The median price fell 15 percent. Foreclosure-driven declines in prices, government credits for first-time buyers and near-record-low borrowing costs may keep stoking demand, helping the economy recover from the worst recession since the 1930s.
The Shanghai Composite Index added 1.7 percent, extending a two-day rebound, as investors shrugged off China’s plans to curb the bank lending that helped fuel a 60 percent equity market rally. The MSCI Asia Pacific Index dropped 0.9 percent as shares in Japan declined.
The S&P 500 has surged 52 percent from a 12-year low on March 9 as 72.4 percent of its companies beat the average analyst estimate for second-quarter profit, the biggest proportion since Bloomberg began tracking the data in 1993.
The U.S. economy’s worst contraction since the Great Depression is slowing faster than economists forecast. Gross domestic product shrank at a less-than-projected 1 percent annual rate in the second quarter. The Conference Board’s index of leading economic indicators has risen three straight months, including the 0.7 percent improvement in June that topped estimates.
Exxon, GE, JPMorgan
Exxon Mobil advanced 1.9 percent to $69.92, GE added 2.9 percent to $14.21 and JPMorgan climbed 2.9 percent to $43.66.
Energy companies, including Exxon, rallied the most among 10 groups in the S&P 500, rising 2.7 percent. They were followed by industrial and raw-materials companies, which jumped more than 2.5 percent.
Crude oil rose to $73.89 a barrel in New York on speculation that the global recession is easing.
The yield on the 10-year Treasury note rose 14 basis points, or 0.14 percentage point, to 3.57 percent, according to BGCantor Market Data.
The dollar and yen declined against most major currencies following the home-sales report and Bernanke’s comments. The euro advanced for a fourth consecutive day against the dollar, the longest streak of gains since June, boosted by the better- than-estimated reports on Germany and France’s economies.
Jackson Hole Symposium
The global economy is “beginning to emerge” from a recession after aggressive action by central banks and governments, Bernanke said at a symposium in Jackson Hole, Wyoming.
The dollar declined 0.6 percent to $1.4339 per euro, from $1.4254 yesterday. The common European currency hasn’t risen on four straight days against since the period through June 2. The yen dropped 0.8 percent to 135.30 yen per euro, from 134.26 yesterday. The yen fell 0.2 percent to 94.35 per dollar, from 94.19.
“The barometers of the reflation trade are a weak dollar and stronger commodity prices, particularly oil,” said Rod Smyth, chief investment strategist at Riverfront Investment Group in Richmond, Virginia. “The market is liking the outlook for the reflation trade, and stocks, being a risk asset, are generally thrown in that bucket.” Riverfront manages $1 billion.
Salesforce.com Inc., Gap Inc. and J. M. Smucker Co. rallied after beating analysts’ estimates.
Better Forecast
Salesforce.com gained 16 percent to $53.67. The largest seller of Internet-based customer-management software boosted its annual forecast for sales and profit.
Gap added 3.3 percent to $19.48. The operator of the Old Navy and Banana Republic chains reported 3.1 percent more per- share profit than analysts estimated. Gap reduced operating expenses and inventory to make up for sales declines as consumers cut spending on clothes.
J. M. Smucker climbed 4.3 percent to $54.10. The maker of jams and Jif peanut butter posted quarterly profit excluding some items of 92 cents a share, beating the average analyst estimate by 15 percent, according to Bloomberg data.
“Earnings season overall has been pretty good,” said Nathaniel Paull, who helps manage about $3 billion at New Amsterdam Partners in New York. “Companies have been managing through pretty well, and the market is sensing that.”
To contact the reporters on this story: Kayla Carrick in New York at kcarrick1@bloomberg.net; Elizabeth Stanton in New York at estanton@bloomberg.net.
