U.S. stocks rose as a jump in housing starts to a four-year high overshadowed earnings that disappointed investors at two of the largest technology companies. Treasuries fell, while the euro climbed with Spanish and Italian bonds.
The Standard & Poor’s 500 Index added 0.4 percent to 1,460.91 at 4 p.m. in New York as homebuilders advanced while International Business Machines Corp. and Intel (INTC:US) Corp. retreated after reporting earnings. The euro gained 0.5 percent to a one- month high of $1.3123. Spain’s 10-year bond yield dropped 34 basis points to 5.47 percent, while Italian rates sank 17 basis points. Ten-year U.S. yields added 10 basis points to 1.81 percent.
An index of 11 U.S. homebuilders surged 3.2 percent after housing starts jumped 15 percent to an 872,000 annual rate last month, exceeding all forecasts in a Bloomberg survey of economists. Spain maintained its investment-grade debt rating from Moody’s Investors Service, which said there’s less risk of losing market access because of the European Central Bank’s willingness to buy the nation’s debt.
“The economic data suggest that this continues to be a slow, grinding recovery,” Stephen Wood, the New York-based chief market strategist for North America for Russell Investments, which oversees $152 billion, said in a phone interview. “Not every company will execute or outperform in a challenging environment, which means security selection becomes a more-important investment strategy.”
The S&P 500 extended its three-day rally to more than 2.2 percent, the biggest gain in almost six months. Indexes of financial, energy and consumer-discretionary companies contributed the most to the advance in the S&P 500 amid 10 industries. PulteGroup Inc., Lennar Corp. and D.R. Horton Inc. jumped at least 2.2 percent to pace gains in builders.
Earnings have increased 2.7 percent and beaten analysts’ estimates at 76 percent of the 70 companies in the S&P 500 that released results so far, according to data compiled by Bloomberg. Analysts as of last week had forecast S&P 500 profits decreased 0.9 percent, halting a three-year streak of growth.
“The housing number was amazing,” Randall Warren, who oversees $75 million as chief investment officer of Warren Financial Service in Exton, Pennsylvania, said in a phone interview. “Corporate earnings have been strong in a slow growth environment, so if housing can help improve the economy then we could see a move up in stocks.”
Dean Foods rallied 13 percent after its WhiteWave Foods Co., the maker of Silk almond milk, filed to raise as much as $320 million in a U.S. initial public offering. Bank of New York Mellon Corp. jumped 5.5 percent to pace an advance in banks after the largest custody bank’s earnings climbed a bigger-than- estimated 11 percent as rising stock prices lifted customer assets. M&T Bank Corp. also rallied more than 5 percent after reporting earnings.
Technology shares were the biggest drag on the market among 10 industries. Intel, the world’s largest chipmaker, slipped 2.5 percent after forecasting fourth-quarter gross margins that missed analysts’ estimates.
IBM, the biggest computer-services provider, plunged the most in three years after reporting third-quarter revenue that fell short of projections. IBM, which accounts for more than 11 percent of the share-price-weighted Dow Jones Industrial Average, lost 4.9 percent and subtracted 80 points from the Dow. The Dow closed 5.2 points higher at 13,557 even as 23 of 30 stocks advanced.
The Stoxx Europe 600 Index (SXXP) rose 0.5 percent, extending a three-day rally to 2.3 percent. ASML Holding NV dropped 5.3 percent as Europe’s largest semiconductor equipment maker forecast fourth-quarter sales that trailed behind projections. PSA Peugeot Citroen (UG) advanced 4.1 percent as Le Figaro said the French government and banks may bail out the automaker’s credit unit.
Japan’s Nikkei 225 Stock Average advanced 1.2 percent as Kyodo News reported Prime Minister Yoshihiko Noda will instruct his cabinet today to craft new economic stimulus measures.
Italy’s two-year notes rose, pushing the yield down 11 basis points to 2.01 percent, while Portugal’s 10-year yield fell below 8 percent. The yield on German 10-year bonds climbed nine basis points to 1.63 percent.
The euro rose against all but four of its 16 major peers, climbing 0.7 percent to 103.65 yen. Japan’s currency weakened against all 16 major peers, erasing earlier gains versus the dollar.
The cost of insuring against default on Spanish and Italian government debt fell to the lowest in more than a year. Credit- default swaps on Spain tumbled 58 basis points to 275 and contracts on Italy dropped 37 to 238 basis points.
Moody’s assigned a negative outlook on the Baa3 sovereign debt, one step above junk, as it concluded the review for a possible further downgrade of Spain’s rating that it had initiated in June. The nation avoided joining euro-region peers Cyprus, Portugal, Ireland and Greece as being rated below investment grade.
After markets closed in Europe, S&P downgraded Cyprus to B from BB and said the nation’s creditworthiness has deteriorated “significantly” since the last downgrade in August as domestic political constraints prevented a timely aid deal.
China’s yuan rose to a 19-year high as the central bank raised its daily fixing to 6.3028 a dollar. Mitt Romney said in a second televised U.S. election debate with President Barack Obama that he will declare China a currency manipulator on his first day in the White House.
Fortress Investment turned bullish on China after betting on declines earlier in the year as it predicts the government will arrest a seven-quarter slowdown in the economy, Adam Levinson, chief executive officer of the hedge fund’s Singapore unit and manager of its Asia Macro Fund, said in an interview yesterday. Fortress manages $47.8 billion of assets globally.
Cotton futures rose the exchange limit 3 cents to 77.86 cents a pound, the highest in almost six months, after inventories fell to the lowest in at least 10 years in the U.S., the world’s biggest exporter. Aluminum, lead and nickel advanced at least 1.5 percent as 16 of 24 materials tracked by the S&P GSCI Index advanced, while declines in gasoline and other energy commodities left the gauge little changed.
New York-traded oil rose 3 cents to $92.12 a barrel, paring early gains as government data showed supplies rose to the highest level for this time of year since government records began in 1982.
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