Bloomberg News

Treasuries, Dollar Rise on Debt-Deal Optimism; AMD Shares Rally

July 22, 2011

July 22 (Bloomberg) -- Treasuries rose and the Dollar Index rebounded from a six-week low amid speculation U.S. lawmakers were nearing a deal to raise the debt limit and avoid default. U.S. technology stocks climbed amid improving earnings, while industrial companies retreated.

The gain in Treasuries pulled the 30-year yield down six basis points to 4.26 percent and the 10-year rate five points lower to 2.96 percent at 4 p.m. in New York. The Dollar Index added 0.3 percent, while the euro fell against 13 of 16 major peers. Advanced Micro Devices Inc. led a rally in technology stocks that drove the Nasdaq-100 Index to a 10-year high, while Caterpillar Inc. dragged the Dow Jones Industrial Average lower after earnings missed analysts’ estimates.

Treasuries strengthened as House Ways and Means Committee Chairman Dave Camp predicted Congress will raise the $14.3 trillion debt ceiling before the government runs out of cash on Aug. 2. House Speaker John Boehner said today that he and President Barack Obama have not yet reached a deal. The euro erased almost a third of yesterday’s 1.5 percent advance against the dollar amid skepticism about Europe’s latest effort to halt the spread of the government debt crisis.

“It’s going to be hard for any deal not to go through -- odds are there’s going to be a deal,” Michael Franzese, managing director and head of Treasury trading at Wunderlich Securities Inc., said in a telephone interview regarding the U.S. debt ceiling. Europe’s debt-crisis plan is “not a cure, it’s a Band-Aid,” he said. “The risk is coming out of the market.”

Technology, Industrial Shares

Advanced Micro Devices, the second-largest maker of processors for personal computers, climbed 19 percent for its biggest gain since November 2009. The company’s earnings and sales forecast topped estimates on orders for new chips. The shares led technology stocks up 1.2 percent as a group for the biggest gain among 10 industries in the Standard & Poor’s 500 Index, which increased 0.1 percent to extend its weekly advance to 2.2 percent.

Caterpillar, which accounted for the second-biggest proportion of the Dow before the start of trading, led the 30- stock gauge down 43.25 points, or 0.3 percent, to 12,681.16 after the company said demand for construction equipment in China slowed. Rockwell Collins Inc., the maker of communication and aviation electronics, slid 5 percent after its earnings also trailed the average analyst estimate amid a drop in sales. C.R. Bard Inc., a maker of medical devices, slumped 12 percent for its biggest drop in 18 years after reporting a quarterly loss due to a legal settlement.

Earnings Season

Per-share earnings have grown about 19 percent and topped analyst estimates at about 83 percent of the 122 companies in the S&P 500 that have reported earnings since July 11, according to data compiled by Bloomberg.

The euro fell for the first time in four days against the dollar, losing 0.4 percent to $1.4363, amid concern measures to contain the debt crisis won’t be enough to quell regional turmoil.

After European markets closed yesterday, euro-area leaders announced a plan to empower their 440-billion euro ($635 billion) rescue fund to buy debt of stressed nations in a bid to build a firewall around Spain and Italy. European stocks and Greek bonds maintained gains today after Fitch Ratings said the country faces “restricted default” following the agreement on the new bailout.

European Bonds

Greek two-year yields were 618 basis points, or 6.18 percentage points, lower at 27.63 percent. The yield on the two- year Irish note fell 4 percentage points to 15.11 percent, down from a record 23.5 percent on July 19. Italian two-year yields rose one basis point and Spanish yields were 10 basis points higher, both reversing earlier declines.

The Stoxx Europe 600 Index rose 0.6 percent to extend this week’s increase to 1.9 percent. National Bank of Greece SA rallied 9.4 percent. SSAB AB, the world’s largest supplier of high-tensile steel, surged 6.8 percent as earnings topped estimates.

Norway’s benchmark OBX stock index rose 0.2 percent, wiping out most of a 1 percent earlier rally after a bombing in the capital. The krone lost 0.3 percent against the U.S. dollar. A bomb blast tore through central Oslo, shattering windows at the prime minister’s office and leaving at least seven people dead, while a gunman shot several people on an island near the Norwegian capital, police said.

The MSCI Emerging Markets Index added 0.9 percent, taking its increase for the week to 1.6 percent. Benchmark gauges in India, South Korea and Thailand advanced more than 1 percent.

Crude oil climbed to a six-week high in New York, rising 0.8 percent to $99.87 a barrel in New York.

The S&P GSCI Index of commodities increased 0.9 percent to the highest level since June 10, with 19 of 24 materials tracked by the gauge advancing. Corn rose for a third straight week and soybeans gained after a crop researcher said harvests in the U.S., the world’s largest grower and exporter, will be smaller than government forecasts. Sugar surged 5 percent amid concern the cane crop will be smaller than forecast in Brazil.

--Editors: Michael P. Regan, Nick Baker

To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; Susanne Walker in New York at swalker33@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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