Feb. 24 (Bloomberg) -- Oil extended the longest rally in two years as tensions with Iran threatened supplies while signs of economic growth boosted the outlook for demand. The Standard & Poor’s 500 Index closed at the highest level since June 2008.
Crude for April delivery rose for a seventh day, increasing 1.8 percent to $109.77 a barrel, the highest settlement since May 3. The Standard & Poor’s 500 Index increased 0.2 percent to 1,365.74 after earlier rallying as much as 0.4 percent. The Dow Jones Industrial Average slipped 1.74 points to 12,982.95, retreating from an almost four-year high. The Dollar Index, a gauge of the currency against six major peers, lost 0.6 percent.
Financial firms and companies that rely on discretionary consumer spending were the biggest drag on the S&P 500 as the index trimmed an early advance triggered after sales of new homes exceeded economists’ forecasts and a gauge of consumer confidence topped estimates.
“Energy prices are getting to the level where you would expect to start to see consumer spending slow,” Barry Knapp, head of equity strategy at Barclays Capital Inc. in New York, told Bloomberg Television. “And we’re seeing that in the stock market in a sense.”
The S&P GSCI gauge of 24 commodities advanced 1.1 percent to the highest since May, led by gains in oil and industrial metals.
Oil surged 6.3 percent this week and may rise again next week on concern that shipments will be disrupted as Western sanctions against Iran tighten, a Bloomberg News survey showed. Thirteen of 30 analysts, or 43 percent, forecast oil will climb through March 2. Twelve respondents, or 40 percent, predicted prices will decline and five estimated there will be little change. Last week, 41 percent of surveyed analysts expected a gain.
All Eyes on Iran
Iran said on Feb. 20 that it stopped selling oil to France and Britain in a move designed to pre-empt European sanctions. The European Union on Jan. 23 agreed to ban crude imports from the Persian Gulf nation starting July 1 to pressure the country over its nuclear program. U.S. sanctions against financial institutions that deal with Iran take effect at the end of June.
U.S. stocks started the session higher today, sending the Dow above 13,000 during the day for the second time since 2008, as the Thomson Reuters/University of Michigan final index of consumer sentiment for February rose to a one-year high of 75.3, topping the median economist projection for a reading of 73. New home sales were at a 321,000 annual pace in January, the Commerce Department reported, above the median estimate of economists for 315,000.
“People are focused more on economic news again,” John Carey, who helps oversee about $220 billion at Pioneer Investments in Boston, said in a telephone interview. “There’s still a lot of nervousness in the market about what’s going on in Europe and in the Middle East,” he said. “There are always things to worry about, but on the whole I’m pretty positive.”
Technology, utility, energy and health-care companies had the best gains among the 10 main groups in the S&P 500 today, rising at least 0.4 percent.
The S&P 500 has rallied more than 24 percent from its 2011 low in October and is trading for about 14 times its companies’ reported earnings, according to data compiled by Bloomberg. The benchmark gauge’s valuation has remained below its five-decade average of 16.4 times earnings since May 2010, the longest stretch below average since a 13-year period beginning in 1973.
Earnings topped analysts’ estimates at 68 percent of the 441 companies in the index that released results since Jan. 9.
American Express Co., Pfizer Inc. and Chevron Corp. had the biggest gains in the Dow today, while Bank of America Corp., Hewlett-Packard Co. and Johnson & Johnson had the biggest declines. Salesforce.com Inc., the largest seller of online customer-management software, rallied 9 percent today after billings growth topped analysts’ estimates.
More than two shares climbed for each that dropped in the Stoxx Europe 600 Index. Telecom Italia SpA jumped 6.8 percent after posting full-year profit before some items that climbed 7.3 percent and forecasting “broadly stable” earnings and revenue this year. Eiffage SA surged 16 percent for the biggest rally in the Stoxx 600 as Chief Executive Officer Pierre Berger said net income and sales at the French builder will climb in 2012. SAP AG added 1.5 percent after its board recommended an 83 percent increase to the software company’s dividend.
The euro rose 0.6 percent to $1.3458, the highest level in more than two months, as it strengthened against 11 of 16 major peers. The yen weakened against all 16 major peers, falling for the seventh straight day versus the euro.
The yield on the Italian 10-year bond fell six basis points to 5.48 percent, with the two-year note yield nine basis points lower. Italy sold 4.5 billion euros ($6 billion) of zero-coupon and inflation-linked bonds, meeting its target for the auction as borrowing costs fell.
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments dropped 4 basis points to 344.
U.S., Chinese and Japanese officials say they will press euro-area countries to do more to merit outside help when officials from the world’s largest economies gather tomorrow. European officials will push fellow Group of 20 nations to commit fresh cash to the International Monetary Fund to help defuse the region’s debt crisis, days after backing a second bailout for Greece.
The Obama administration says Europe must first strengthen its firewall to prevent debts of countries such as Italy and Spain from becoming unsustainable.
The MSCI Emerging Markets Index advanced 0.8 percent. The Shanghai Composite Index jumped 1.3 percent, and Russia’s Micex Index climbed 3.7 percent, the most since November, as oil producers rallied. Indonesia’s Jakarta Composite Index sank 1.6 percent. BSE India Sensitive Index dropped 0.9 percent, a third day of losses, on concern oil-price gains may fuel inflation.
--With assistance from Claudia Carpenter, Will Hadfield, Adam Haigh, Abigail Moses, Daniel Tilles and Jason Webb in London, Lynn Thomasson in Hong Kong and Michael P. Regan in New York. Editors: Michael P. Regan, Jeff Sutherland
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