U.S. equities halted the longest slump of the year and European stocks rebounded from a two-month low as Alcoa (AA:US) Inc. opened the earnings season with an unexpected profit. Spanish bonds rose as a European Central Bank official signaled the ECB may revive its bond-purchase program.
The Standard & Poor’s 500 Index added 0.7 percent to close at 1,368.71, snapping a five-day slump. The Dow Jones Industrial Average climbed 89.46 points as Alcoa rallied 6.2 percent. The Stoxx Europe 600 Index (SXXP) rose 0.7 percent. The euro ended a five- day drop against the yen, while yields on Spanish and Italian 10-year debt dropped at least 10 basis points. Oil helped lead commodities higher as U.S. stockpiles of gasoline and distillate fuels declined, while natural gas tumbled below $2 per million British thermal units for first time since January 2002.
The S&P 500 slid 4.3 percent in the previous five sessions as $2 trillion was erased from global equities amid concern Europe’s debt crisis was worsening and weaker-than-forecast U.S. jobs growth. Today’s rebound came as Alcoa’s results boosted optimism at the start of the first-quarter earnings-reporting season, while ECB board member Benoit Coeure spurred speculation the central bank will help reduce Spain’s borrowing costs after 10-year yields touched 6 percent for the first time this year.
“The environment is still very positive for stocks,” Robert Hagstrom, fund manager at Legg Mason Capital Management Inc., said on Bloomberg Television’s “In the Loop” program. Legg Mason manages about $638 billion. Bull markets “need corrections, need a pullback, in order to be sustainable. We think about that all the time. Until we actually go through it,” he said. Then “it’s the risk-off traders, or Chicken Little, maybe, that the world is coming to an end. But it’s not coming to an end.”
‘Modest to Moderate’
U.S. equities held onto gains after the Federal Reserve said the economy maintained its expansion in all 12 of its regions as manufacturing, hiring and retail sales showed signs of strength in the face of higher fuel prices.
“The economy continued to expand at a modest to moderate pace from mid-February through late March,” the Fed said today in its Beige Book business survey, published two weeks before the Federal Open Market Committee meets to set monetary policy. “Hiring was steady or showed a modest increase across many districts.”
The S&P 500 ended its longest losing streak since November as financial, consumer-discretionary, telephone and industrial stocks led gains in all 10 of the index’s main industries. Alcoa, Bank of America Corp. (BAC:US), JPMorgan and Cisco Systems Inc. rose more than 2 percent to lead the Dow (INDU) higher.
Alcoa marked the unofficial start of an earnings season by reporting a profit of $94 million, or 9 cents a share, after orders rose and the largest U.S. aluminum producer closed higher-cost smelting capacity. Profit excluding restructuring costs and other items was 10 cents a share, compared with the average analyst estimate for a loss of 4 cents.
Analysts project profit growth slowed to 0.8 percent in the first quarter. Google Inc. (GOOG:US) is scheduled to report results tomorrow after the close of trading, while JPMorgan Chase & Co. and Wells Fargo & Co. will release earnings on April 13.
A rally in Alcoa shares following earnings has foreshadowed gains for the S&P 500 in the past, according to Ryan Detrick at Schaeffer’s Investment Research. Since 2005, the benchmark gauge has risen an average 4 percent in the three-month period that followed a positive reaction to earnings from Alcoa, which is typically the first company in the Dow to report results.
“This earnings season could be a major positive catalyst,” Detrick, senior technical strategist at Schaeffer’s, said in a telephone interview from Cincinnati. “We’ve had a strong selloff ahead of it. Should earnings come in slightly better than expected, that could turn out to be one of those buying opportunities.”
UniCredit SpA (UCG) and Intesa Sanpaolo SpA, Italy’s biggest banks, led a rebound in financial shares, advancing more than 5.4 percent. CGGVeritas SA (GA), the world’s largest seismic surveyor of oil fields, climbed 4.5 percent after saying it boosted vessel production in the first quarter. Givaudan SA, a Swiss maker of flavors and fragrances, gained 3.7 percent as sales increased.
Six countries in Europe sold debt today, with Italy meeting its target and Germany receiving bids for less than its maximum objective.
Germany’s 10-year bund fell, with the yield rising 14 basis points to 1.78 percent. The 10-year Italian bond yield fell 15 basis points to 5.53 percent, while the 10-year Spanish bond yield declined 10 basis points to 5.88 percent. The euro strengthened 0.5 percent to 106.07 yen and gained 0.2 percent to $1.3108.
The yield on the 10-year U.K. gilt increased four basis points to 2.05 percent after its debt agency sold 4.5 billion pounds ($7.2 billion) of September 2017 securities.
Lead and aluminum climbed more than 1.6 percent to lead gains in 17 of 24 commodities tracked by the S&P GSCI. Oil increased 1.7 percent to $102.70 a barrel, rebounding from an almost two-month low. Natural gas dropped as low as $1.976 per million British thermal units for the first time in more than 10 years on speculation there won’t be enough weather-driven demand for the fuel in coming weeks to reduce an inventory surplus.
The MSCI Emerging Markets Index (MXEF) slipped 0.1 percent, falling for a sixth straight day and reaching the lowest level since Jan. 30.
The Hang Seng China Enterprises Index (HSCEI) fell 0.9 percent, its third straight decline. The Shanghai Composite Index (SHCOMP) gained 0.1 percent, while benchmark indexes in the Czech Republic and Turkey rallied more than 1 percent.
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