Bloomberg News

S&P 500 Approaches 3-Year High as Treasuries Retreat, Euro Gains

February 17, 2012

Feb. 17 (Bloomberg) -- U.S. stocks gained, with the Standard & Poor’s 500 Index approaching a three-year high, while Treasuries fell and the euro strengthened amid optimism European leaders will agree on terms for a second Greek bailout.

The S&P 500 increased 0.2 percent to close at 1,361.23 at 4 p.m. in New York after coming within a quarter point of touching a three-year high of 1,363.61 set in April. The Dow Jones Industrial Average added 45.79 points to 12,949.87, the highest closing level since May 2008. Ten-year Treasury yields climbed one basis points to 2.00 percent. The euro increased 0.2 percent to $1.3151, trimming a rally of as much as 0.5 percent amid concern that a European Central Bank swap of Greek bonds may trigger rating cuts. Oil settled at a nine-month high.

Italian Prime Minister Mario Monti, German Chancellor Angela Merkel and Greek Prime Minister Lucas Papademos expressed confidence today that an agreement on the rescue can be reached when euro-nation finance chiefs meet on Feb. 20 in Brussels. In the U.S., the Conference Board’s index of leading economic indicators rose in January and the cost of living climbed less than forecast, pointing to sustained economic growth with limited inflation pressure.

“The market is assuming a Greece deal,” Wayne Lin, a money manager at Baltimore-based Legg Mason Inc., said in a telephone interview. His firm oversaw $631 billion as of Jan. 31. “I do believe they are getting a second bailout. My assumption is that Greece will behave rationally.”

‘Better Footing’

Consumer-discretionary, telephone and financial companies climbed at least 0.6 percent for the biggest gains among 10 groups. Gauges of health-care, utility and technology companies retreated.

U.S. stocks advanced yesterday, driving the S&P 500 up 1.1 percent. The index rose 1.4 percent this week and is up 8.2 percent for the year. A rise above 1,363.61 would take it to the highest level since June 5, 2008, and may extend the rally, according to Schaeffer’s Investment Research’s Ryan Detrick. He said the next target for the S&P 500 would be 1,440, the intraday peak in May 2008.

“It would be a good sign that confidence is coming back,” Detrick, senior technical strategist at Schaeffer’s, said in a telephone interview from Cincinnati. “People are realizing that things are in much better footing and that should lead to higher equity prices.”

U.S. Movers

H.J. Heinz Co. gained 4.6 percent as earnings at the world’s biggest ketchup maker beat projections. Gilead Sciences Inc., which bought Pharmasset Inc. for $10.8 billion last year to gain an experimental hepatitis C drug, dropped 14 percent as some patients on the medicine relapsed after stopping therapy. General Mills Inc., the maker of Cheerios cereal and Yoplait yogurt, slumped 3.6 percent after cutting its profit forecast.

The consumer-price index rose 0.2 percent in January after no change, the Labor Department said today. The 0.4 percent increase in the Conference Board’s leading economic indicators, a gauge of the outlook for the next three to six months, followed a 0.5 percent rise in December, the strongest back-to- back gains in almost a year.

“The fact that the index has been up four months in a row, and we’ve had solid increases, it does suggest that the economic momentum continues at a moderate pace,” Kathleen Bostjancic, director of macro analysis at The Conference Board, said in a Bloomberg Television interview. “It does look as if those recession fears we had in August and September are far behind us.”

Euro Strengthens

The euro strengthened versus 10 of 16 major peers, climbing more than 0.5 percent versus the Australian dollar and Japanese yen. The shared currency trimmed its weekly decline against the dollar to 0.4 percent. The dollar weakened against 14 of 16 counterparts. Thirty-year Treasuries also fell, sending yields up one basis point to 3.15 percent.

In European bond markets, Italian and Spanish 10-year yields decreased more than seven basis points. Yields on U.K., French and German bonds increased. Greece’s 10-year rate added 1 percentage point to 34.38 percent, the highest in more than a month.

The Greek government is drawing up legislation that could be used to impose losses on investors who don’t support the debt swap that’s part of the country’s bailout, said two euro-region officials familiar with the situation. The law may be introduced to parliament in Athens in the coming days, said one of the officials, who spoke on condition of anonymity because the deliberations are confidential.

Collective Action Clause

Euro region finance ministers are prepared to back the use of so-called collective action clauses if a voluntary debt swap doesn’t draw enough participation, the other person said. The ECB is swapping its Greek bonds for new ones to ensure it isn’t forced to take losses in a debt restructuring, three euro-area officials said.

The Stoxx Europe 600 Index advanced 0.6 percent today to the highest level since July. Aker Solutions ASA surged 21 percent as Norway’s biggest oil-platform maker reported net income that topped estimates. Lafarge SA jumped 8.3 percent after the world’s largest cement maker posted better-than- expected operating profit and unveiled a 400 million-euro ($525 million) cost-cutting plan.

Oil in New York climbed 0.9 percent to $103.24 a barrel. Natural gas rallied 4.6 percent after Encana Corp. said it will scale back production following a slump in prices. Wheat and lead climbed more than 1.4 percent as 14 of 24 commodities in the S&P GSCI Index advanced.

--With assistance from Corinne Gretler in Zurich, Claudia Carpenter, Andrew Rummer, Michael Shanahan, Daniel Tilles, Jason Webb and Stephen Kirkland in London, Jonathan Burgos in Singapore, Jeff Black in Frankfurt, Tony Czuczka in Berlin and James G. Neuger in Brussels. Editors: Michael P. Regan, Nick Baker

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Michael P. Regan in New York at mregan12@bloomberg.net

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


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