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The Standard & Poor’s 500 Index (SPX) trimmed losses in the final two hours of trading ahead of data forecast to show growth in consumer confidence and spending tomorrow, the final day of the best first-quarter rally since 1998. Treasuries and the dollar rose, while oil tumbled.
The S&P 500 slipped less than 0.2 percent to close at 1,403.28 at 4 p.m. in New York after tumbling as much as 1 percent. The Dow Jones Industrial Average increased 19.61 points to 13,145.82. The yen appreciated against all 16 most-traded peers and the dollar climbed versus 11. Ten-year Treasury yields fell five basis points to 2.16 percent, while Italian and Spanish bonds slid. Oil lost 2.5 percent, the biggest drop of the year, as France said governments are moving closer to releasing stockpiles from emergency reserves.
U.S. benchmark equity indexes recovered from their lows of the session, with the Dow reversing a 94-point loss, amid speculation a three-day slump was overdone given improving economic data and as investors prepared for the final session of the quarter. More than $5.6 trillion has been added to equity values worldwide this year on signs of a U.S. economic recovery and efforts to contain Europe’s debt crisis.
“The market’s momentum is decidedly upward,” David Sowerby, a Bloomfield Hills, Michigan-based portfolio manager at Loomis Sayles & Co., which oversees about $160 billion, said in a phone interview. “The decline that we’ve had is normal after the run-up in stocks. The better economic news is winning a tug- of-war with any concerns about the economy.”
U.S. stocks followed global equities lower earlier after S&P said Greece may have to restructure its debt again and lower-than-forecast profits fueled concern China’s growth is slowing.
Alcoa Inc., Caterpillar Inc. (CAT) and Coca-Cola Co. climbed more than 1.5 percent for the biggest gains in the Dow. Red Hat Inc. surged 20 percent to a 12-year high of $61.43 after profit and sales topped projections. Aetna Inc. and Cigna Corp. (CI) added at least 4 percent as investors speculated the U.S. Supreme Court will overturn aspects of the Affordable Care Act, benefitting the health-insurance industry.
Best Buy Co. (BBY), the largest consumer-electronics retailer, slumped 7 percent as sales missed estimates. American Express Co. (AXP), the biggest credit-card issuer by purchases, dropped 2 percent as Wells Fargo & Co. cut its recommendation (AXP) on the shares.
The S&P 500 has retreated for three straight days after reaching an almost four-year high on March 26. The index will likely remain stuck in the 500-point range where it’s been four- fifths of the time since 2000 until the Federal Reserve allows interest rates to rise, according to Piper Jaffray Cos.
The benchmark gauge of U.S. stocks has traded between 1,000 and 1,500 for about 80 percent of the time since 2000, according to data compiled by Bloomberg. Equity gains stalled in the past 12 years as the economy suffered from the bursting of bubbles in technology and real estate, forcing the central bank to cut its benchmark interest rate to near zero from 6.5 percent to spur growth. Fed Chairman Ben S. Bernanke has pledged to keep borrowing costs low through at least late 2014.
“The S&P 500 is approaching the upper end of the secular trading range,” Craig W. Johnson, a Minneapolis-based technical market strategist with Piper Jaffray, wrote in a note yesterday. “This resistance will likely remain intact until 2014-2015, and will correspond with a secular change in bond yields.”
Thirty-year U.S. bonds also rallied today, sending their yield down four basis points to 3.27 percent. Rates on two-year notes slipped one basis point to 0.34 percent. Treasuries remained higher after the U.S. auctioned $29 billion in U.S. seven-year securities, the last of three note offerings this week totaling $99 billion. The notes drew a yield of 1.590 percent, compared with a forecast of 1.572 percent in a Bloomberg News survey of nine of the Federal Reserve’s primary dealers.
S&P 500 futures extended losses before the open of exchanges in New York today as government data showed initial jobless claims fell by 5,000 to 359,000 last week, the lowest since April 2008 while above the 350,000 median forecast of economists in a Bloomberg News survey. The government data also contained revisions dating back to 2007.
The Thomson Reuters/University of Michigan index of consumer confidence is forecast to rise to 74.5 in March, near the highest level in a year, after a preliminary reading of 74.3, according to a Bloomberg survey of economists. Personal income is projected to have grown 0.4 percent and consumer spending rose 0.6 percent, economists predicted before government data tomorrow.
The economy in the U.S. grew at a 3 percent annual rate in the last three months of 2011, the same as previously estimated, while corporate profits climbed at the slowest pace in three years, raising the risk that business investment and hiring will cool.
The increase in gross domestic product was the biggest in more than a year and followed a 1.8 percent gain in the prior period, revised figures from the Commerce Department showed today. Company earnings were up 0.9 percent from the third quarter, the smallest advance since the last three months of 2008.
About ten shares fell for every one that advanced in the Stoxx 600 (SXXP). Hennes & Mauritz AB, Europe’s second-largest clothing retailer, slid 4.9 percent as increased textile costs and markdowns led to the weakest profitability in eight years. Banks led declines among 19 industries, falling 2.9 percent as a group. Banca Monte dei Paschi di Siena SpA, Italy’s third- biggest bank, tumbled 11 percent after posting a record loss. FirstGroup Plc, Britain’s biggest train operator, sank 14 percent amid “challenging trading conditions” at its bus unit.
In European bond markets, rates on 10-year Italian, Spanish and Portuguese debt climbed at least 10 basis points. The Italian 10-year bond yield rose 11 basis points to 5.21 percent even as borrowing costs fell at the sale of 3.25 billion euros ($4.3 billion) of bonds due in September 2022. The yield on similar-maturity German bunds, Europe’s benchmark government security, fell three basis points to 1.81 percent.
Greece will probably have to restructure its debt again and this may involve bailout partners such as European governments, said Moritz Kraemer, head of sovereign ratings at S&P.
European governments are preparing for a one-year increase in the ceiling on rescue aid to 940 billion euros to keep the debt crisis at bay, according to a draft statement written for finance ministers before a meeting in Copenhagen tomorrow. The European Union had its AAA long-term issuer default rating affirmed by Fitch Ratings, which cited the support from the EU’s 27 member states, nine of which are rated AAA by Fitch. The outlook is stable.
Oil fell to a six-week low of $102.78 a barrel in New York, extending yesterday’s 1.8 percent decline. French Prime Minister Francois Fillon said the prospects of an accord on tapping strategic reserves are good and the International Energy Agency said it’s ready to act if supplies are disrupted.
The Hang Seng China Enterprises Index slumped 1.6 percent after China’s PICC Property & Casualty Co., Sany Heavy Industry Co. and Zijin Mining Group Co. reported net income that trailed estimates.
The MSCI Emerging Markets Index (MXEF) lost 1.1 percent. Russia’s Micex tumbled 1.7 percent as oil retreated. Benchmark gauges in Taiwan, Israel, Poland and the Czech Republic sank at least 1.4 percent.
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