Bloomberg News

Stocks Erase Drop Before Index Changes; Commodities Rise

November 30, 2012

Euro Strengthens as Metals Advance

Stocks, commodities, bonds and the euro rose this month on signs of growth in the U.S. and Asia and speculation political leaders in America and Europe will take steps to keep their economies from deteriorating. Photographer: Chris Ratcliffe/Bloomberg

U.S. stocks erased losses in the final 15 minutes as investors bought shares before changes to MSCI Inc. indexes and weighed developments in budget negotiations. Commodities rose. Treasuries were little changed.

The Standard & Poor’s 500 Index closed up less than 0.1 percent at 1,416.18 at 4 p.m. in New York, erasing an earlier 0.3 percent drop and capping a second straight weekly gain. Yields on 10-year U.S. notes were little changed at 1.62 percent after losing seven basis points during the week amid concern about the U.S. budget talks. The S&P GSCI Index of 24 raw materials added 0.1 percent as industrial metals led gains.

The MSCI All-Country World Index of stocks added 0.1 percent. Some $321.9 billion was invested in exchange-traded funds linked to MSCI indexes at the end of October, according to MSCI, and about $3 trillion of funds are benchmarked against its indexes globally. Earlier losses in U.S. equities were triggered by skepticism that lawmakers will agree on a budget to avoid the fiscal cliff of automatic spending cuts and tax increases.

“Rebalances can sometimes create price dislocation and excessive volatility,” Mike Shea, a managing partner at New York-based brokerage firm Direct Access Partners LLC, wrote in an e-mail. “There’s a fair amount of potential for price dislocation there.”

MSCI Changes

Changes to MSCI’s global indexes were implemented at the close of trading today, causing the S&P 500 to jump as much as 0.2 percent to its highest intraday level of 1,418.86 within the final two minutes of trading before paring most of its gain by the close. The eight U.S. companies that were added included homebuilder Lennar Corp. and Under Armour Inc., a sportswear maker. For-profit education company Apollo Group Inc. and coal miner Walter Energy Inc. were among the seven stocks removed.

MSCI made the changes after a semi-annual review. Amendments to indexes can alter share prices as passively managed funds buy and sell stocks to mirror the benchmark indexes.

“A lot of the volatility near today’s close is due to the MSCI rebalance,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said by e-mail. His firm oversees $250 billion. “Outside of that, we’ve been trading solely on political rhetoric in Washington.”

Equities also recovered after Norway’s sovereign wealth fund said it plans to invest in U.S. real estate. The $660 billion sovereign wealth fund, the world’s largest, plans to invest about $11 billion as it enters the U.S. property market, according to the chief executive officer of Norges Bank Investment Management, which oversees the pool.

Norway Investment

The fund, mandated by the country’s finance ministry to eventually put 5 percent of assets in property, wants one-third of that, or 1.7 percent, to be in the U.S., said Yngve Slyngstad, CEO of Oslo-based NBIM. The pool held 0.3 percent in real estate, 60.3 percent in stocks and 39.4 percent in bonds as of the end of September, according to its quarterly report.

Stocks, commodities, bonds and the euro rose this month on signs of growth in the U.S. and Asia and speculation political leaders in America and Europe will take steps to keep their economies from deteriorating.

Market Movers

The S&P 500 closed at the highest level since the election on Nov. 6 and capped a 0.3 percent gain for November. U.S. equity funds tracked by EPFR Global attracted more than $10 billion in net inflows during the fourth week of November, their best showing in more than a year, according to the Cambridge, Massachusetts-based research firm.

Utility, telephone and consumer-staples companies led gains among the index’s 10 main industry groups today, while industrial and technology stocks retreated. Wal-Mart Stores Inc., Home Depot Inc. and Hewlett-Packard Co. added at least 0.8 percent for the biggest gains in the Dow Jones Industrial Average. (INDU)

VeriSign Inc. plunged 13 percent, the most in the S&P 500, after a contract extension letting the company register Web sites ending in .com limited price increases. Yum! Brands Inc. lost 9.9 percent after saying quarterly same-store sales in China will decline. MetroPCS Communications Inc. rallied 5 as Guggenheim Securities LLC said the wireless carrier may get a bid from Sprint Nextel Corp.

D.C. ’Stalemate’

President Barack Obama and House Speaker John Boehner stood their ground with opposing plans to avert the fiscal cliff and warned there was no quick path to a solution.

“In Washington, nothing’s easy so there’s going to be some prolonged negotiations,” Obama said today from the floor of a toy factory in Hatfield, Pennsylvania.

“There’s a stalemate, let’s not kid ourselves,” Boehner said less than 30 minutes later during a news conference at the Capitol in Washington.

Stocks also fell earlier as government data this morning showed spending by U.S. consumers unexpectedly declined and incomes stagnated in October as superstorm Sandy kept those in the Northeast from getting to work or from shopping. Purchases decreased 0.2 percent, the weakest reading since May, after a 0.8 percent gain in the prior month, Commerce Department figures showed. Personal incomes were unchanged.

The Stoxx Europe 600 Index (SXXP) slipped 0.2 percent today, erasing earlier gains in the final hour of trading. The regional benchmark index climbed 0.9 percent this week, extending the November advance to 1.5 percent.

The euro appreciated 0.5 percent versus the yen, extending this month’s advance to almost 4 percent. It also capped a fourth-straight monthly gain versus the dollar.

German lawmakers approved today Greece’s latest rescue package designed to ease terms for aid and help resolve the three-year-old debt crisis.

Asian Currencies

The Dollar Index, a gauge of the currency against six major peers, was little changed today and up 0.4 percent for November, snapping a three-month retreat.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding Japan, rose for a sixth month, touching the strongest level since September 2011.

The Markit iTraxx Europe index, a benchmark for corporate credit risk, capped a six month of declines, dropping more than 30 percent during the period. The index of credit-default swaps linked to 125 investment grade companies rose less than one basis point today to 123, and is down from 177 basis points at the end of May.

Oil rose 1 percent to $88.94 a barrel and rallied more than 3 percent this month, after falling 11 percent in September and October. The S&P GSCI gauge of 24 commodities increased 0.1 percent and capped its first monthly advance since August.

The MSCI Emerging Markets Index (MXEF) climbed 0.3 percent, extending this month’s advance to 1.2 percent. India’s Sensex index added 0.9 percent to a 19-month high as the country’s quarterly gross domestic product growth matched estimates. Russia’s Micex Index gained 1.3 percent and the Shanghai Composite Index (SHCOMP) increased 0.9 percent. Benchmark gauges in Taiwan and Thailand added more than 1 percent.

To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Stephen Kirkland in London at skirkland@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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