Stocks Gain on Earnings as Gold Touches $1,500 on Weaker Dollar
April 19, 2011, 4:14 PM EDTBy Stephen Kirkland and Rita Nazareth
April 19 (Bloomberg) -- Stocks rebounded from the biggest drop in a month after companies from Johnson & Johnson to Burberry Group Plc. reported results that beat analyst estimates. Gold futures touched $1,500 an ounce for the first time as the dollar weakened. Treasuries rose.
The Standard & Poor’s 500 Index advanced 0.6 percent to 1,312.62 at 4 p.m. in New York as higher-than-forecast housing starts also drove gains. The Stoxx Europe 600 Index increased 0.5 percent as Burberry rallied 6 percent. The euro climbed 0.7 percent to $1.4332. Canada’s dollar strengthened versus 14 of 16 major peers as accelerating inflation triggered bets the central bank will boost interest rates.
Johnson & Johnson, the world’s second-biggest seller of health-care products, led gains in the Dow Jones Industrial Average after increasing its full-year forecast. Burberry, Britain’s biggest luxury retailer, said quarterly sales jumped 32 percent and SKF AB, the world’s largest maker of ball bearings, posted record profit. Stocks slid yesterday as S&P cut the long-term U.S. credit outlook to negative.
“This market has been very resilient,” said Burt White, who helps oversee $284 billion as chief investment officer at LPL Financial Corp. in Boston. “Things are better than people think as far as the economy goes. Today’s housing numbers were pretty good. You’ve got a bellwether such as Johnson & Johnson coming out with good news. The market is excited to see that.”
Earnings Season
The S&P 500 rebounded after yesterday dropping 1.1 percent, the most since March 16. J&J climbed 3.7 percent after new drugs and a weaker dollar boosted results. Steel Dynamics Inc. added 5.7 percent as its profit also beat projections. Newmont Mining Corp. helped pace gains in raw-material producers, rising 1.3 percent as gold and copper prices increased.
Goldman Sachs Group Inc. rallied as much as 1.5 percent after earnings topped estimates, before erasing gains and retreating 1.3 percent after Rochdale Securities LLC reduced its rating to “neutral” from “buy.”
About 6.6 billion shares changed hands on U.S. exchanges, 15 percent less than the three-month average as trading slowed on the Passover holiday.
A gauge of homebuilders in S&P indexes gained 2.2 percent as all 12 of its stocks advanced. A report today showed building permits, a proxy for future construction, rose 11 percent to a 594,000 pace. They were projected to rise 1.1 percent to a 540,000 annual pace. Housing starts increased 7.2 percent to 549,000, exceeding the 520,000 median forecast of economists surveyed by Bloomberg News.
About three shares gained for each that fell in the Stoxx 600. SKF rallied 6.4 percent. LVMH Moet Hennessy Louis Vuitton SA, the world’s largest luxury-goods maker, advanced 4.7 percent as sales beat analysts’ estimates. Novartis AG, the third- biggest stock in the index, gained 3.5 percent after the drugmaker’s sales and profit surpassed projections.
AAA Rating
The yield on the 10-year U.S. Treasury note slipped two basis points to 3.36 percent and the 30-year yield lost three basis points to 4.43 percent.
President Barack Obama began a tour promoting his proposal to cut long-term budget deficits with a new urgency after S&P said yesterday that the nation’s AAA credit rating is in peril. The divide between Republicans and Democrats in Congress over combating the nation’s debt was spotlighted by S&P’s lowering of the long-term U.S. credit outlook to “negative,” with each side saying the alert bolsters their competing arguments.
Treasury Secretary Timothy F. Geithner said he’s confident U.S. political leaders will bridge their differences and move toward a long-term plan to narrow record budget deficits and reduce the debt.
‘Strong Targets’
“We have an opportunity now over the next two months to make some real progress,” Geithner said in an interview on Bloomberg Television today. “What we agree on is putting in place strong targets for savings, deficit reduction over a specific time frame with enforceable limits,” he said.
Gold for June delivery settled up 0.1 percent at $1.495.10 after earlier reaching $1,500.50.
The dollar weakened against 12 of 16 major peers, losing at least 1 percent versus Norway’s krone and Sweden’s krona. The euro appreciated against 11 of its 16 major counterparts amid speculation the European Central Bank will raise interest rates further.
The loonie, as the Canadian currency is nicknamed, strengthened 0.8 percent to $1.0455 after the consumer price index advanced 3.3 percent in March from a year earlier, compared with a 2.2 percent pace of increase in the previous month, Statistics Canada reported. The median forecast of 25 economists was for a 2.8 percent annual rate.
Commodities Gain
Crude oil for May delivery increased for the fourth time in five days, rallying 1 percent to $108.15 a barrel as the weaker dollar lifted commodities.
Oil traders have turned $80 crude into the second-biggest bet in the options market as a surge in futures to the highest level since 2008 spurred concern that demand may tumble.
Open interest, the number of contracts held by traders, has more than doubled since January for $80 put options for December 2011 and 2012 as New York futures last week touched a 30-month high of $113.46 a barrel. The two puts, bets that prices will fall, account for 21 percent of the open interest among the top 10 contracts traded on the New York Mercantile Exchange.
The S&P GSCI index of 24 commodities gained 0.3 percent, recouping some of yesterday’s 1.2 percent slide. Cotton retreated 3.9 percent. Wheat futures rose 1.3 percent, a third straight gain, as weather conditions in the U.S. worsened and Germany’s crop estimate was lowered amid a dry spell.
The MSCI Emerging Markets Index increased 0.6 percent as benchmark gauges in Russia, Turkey, South Africa, Egypt and Hungary rallied more than 1 percent. The Shanghai Composite Index led declines in Asia, sliding 1.9 percent, on concern the U.S. debt outlook may deteriorate further and speculation that China will further tighten monetary policy.
The MSCI Asia Pacific Index lost 1 percent to the lowest level this month as S&P’s downgrade of the U.S. credit outlook fueled concern that a recovery in the global economy may slow.
Greece’s two-year yields jumped as much as 39 basis points to a record 20.73 percent as the government sold 1.625 billion euros ($2.33 billion) of bills.
--With assistance from Ian Katz and Peter Cook in Washington, Pham-Duy Nguyen in Seattle, Matthew Brown, Claudia Carpenter, Adria Cimino, Andrew Rummer and Jason Webb in London. Editors: Michael P. Regan, Chris Nagi
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Rita Nazareth in Sao Paulo at rnazareth@bloomberg.net.
To contact the editor responsible for this story: Michael Regan at mregan12@bloomberg.net
