U.S. equities rose, recovering early losses, as financial shares led gains that sent the Standard & Poor’s 500 Index (SXXP) within nine points of its record. Stocks dropped in Europe and China as Fitch Ratings cut Italy’s debt and China’s industrial output weakened. Treasuries fell.
The S&P 500 added 0.3 percent to 1,556.22 at 4 p.m. in New York and the Dow Jones Industrial Average climbed 50.22 points to 14,447.29, setting a record for a fifth straight day. The VIX, the benchmark gauge of U.S. equity options, slid to a six- year low. The Stoxx Europe 600 Index dropped 0.1 percent and Italy’s 10-year yield rose four basis points to 4.64 percent. Ten-year Treasury yields rose 1.5 basis points to an 11-month high of 2.06 percent and 30-year rates climbed for a sixth day, the longest stretch since 2007.
U.S. equity funds attracted $4.9 billion in the first week of March, the most in more than a month, according to data from EPFR Global.Genworth (GNW:US) Financial Inc. led a rally that sent financial shares to the biggest gain among 10 groups amid speculation the company will benefit from the rebound in the housing market. U.S benchmark indexes followed European shares lower earlier after Fitch cut Italy’s debt rating on March 8 and China’s industrial output had the weakest start to a year since 2009.
“The fundamentals continue to support a higher stock market,” Eric Green, director of research and fund manager at Penn Capital Management, said by phone. The Philadelphia-based firm oversees about $7 billion. “In the very short term, is a pullback a possibility? Absolutely. If we get a pullback, likely a lot of people will step in.”
The Dow reached an all-time high last week for the first time since 2007 amid better-than-forecast jobs growth and as investors speculated that central banks will continue with stimulus measures. The S&P 500 is about 0.6 percent below its record. Last week’s 2.2 percent rally in the Dow pushed the gauge’s price-to-earnings ratio to 14, the highest level since May 2011, data compiled by Bloomberg show. The S&P 500 is valued at 15.4 times earnings, a 22-month high.
Among stocks moving today, Boeing Co., American Express Co. and Merck & Co. rallied more than 1 percent to lead the Dow’s gains. Dick’s Sporting Goods Inc. tumbled 11 percent after forecasting profit that was less than analysts estimated. Apple Inc. advanced 1.4 percent, reversing an early 1.5 percent tumble. The maker of iPhones will outline what it plans to do with a growing pile of cash by next month, predicted Howard Ward, chief investment officer at Gamco Investors Inc., in an interview today on Bloomberg Radio’s “Surveillance” with Tom Keene.
Genworth, the provider of life insurance and mortgage guaranties, jumped 6.7 percent after Scotia Capital upgraded the company two levels to sector outperform, the second-highest of the bank’s four ratings. Barron’s said March 9 the insurer will reward investors. Financial shares in the S&P 500 climbed 0.8 percent to the highest level since October 2008. Wells Fargo & Co. and Citigroup Inc. added at least 1.7 percent to pace the advance among the biggest banks.
The VIX, as the Chicago Board Options Exchange Volatility Index is know, sank 8.2 percent to 11.56, the lowest since February 2007. Some 421 stocks in the S&P 500 rose above their 50-day moving averages, according to data compiled by Bloomberg, the most since Feb. 19.
The Dollar Index slipped 0.2 percent to 82.53 after reaching its highest level in seven months before a report this week that economists said will show U.S. retail sales improved.
The Stoxx 600 slipped from the highest level since June 2008 after climbing 2.3 percent last week. Storebrand ASA (STB) slumped 6.6 percent in Oslo after Norway’s second-largest insurer said it will need to increase the amount of money it sets aside for longer life expectancy. ICAP Plc (IAP), the world’s largest broker of transactions between banks, lost 3.6 percent as UBS AG downgraded the shares to sell.
Fitch cut Italy’s credit rating one level to BBB+ with a negative outlook, saying an inconclusive election in February has produced political paralysis that threatens the country’s ability to respond to a recession and the European debt crisis. The grade is three levels above junk and one higher than Spain.
German 10-year bund yields fell one basis point to 1.52 percent. The euro was 0.4 percent higher at $1.3051 and up 0.6 percent at 125.63 yen. Japan’s currency lost 0.3 percent to 96.26 per dollar.
The Hungarian forint weakened against 14 of 16 major peers, retreating 0.8 percent versus the euro, sliding for a second day to the weakest level since June. The Hungarian central bank will complete management changes by the end of March, it said in a statement on its website today. Gyorgy Matolcsy, Magyar Nemzeti Bank’s new president, moved to solidify his authority by stripping two vice presidents appointed by his predecessor of their areas of responsibility, according to the regulator’s new articles of association published in the official gazette on March 8.
Japan’s Topix (TPX) Index advanced as Honda Motor Co., which gets about 80 percent of its revenue outside Japan, rose 2.6 percent. The Topix has jumped 41 percent in the 74 days since the biggest rally for Japanese shares since 1987 began in November. After adjusting for the yen’s depreciation against the dollar, the return shrinks to 18 percent, or three percentage points more than the S&P 500, according to data compiled by Bloomberg.
The MSCI Emerging Markets Index (MXEF) fell 0.2 percent from a two-week high. The Kenyan shilling strengthened 0.9 percent versus the dollar after Uhuru Kenyatta won the country’s March 4 presidential election with 50.07 percent of the vote. His main rival, Raila Odinga, plans to challenge the outcome in court. Last week’s election was the first since a disputed presidential vote in 2007 that triggered ethnic clashes in which more than 1,100 people died.
The S&P GSCI Index of was little changed as hogs, gasoline and Brent crude retreated, while corn, nickel and soybeans led gains.
Brent crude oil for April settlement on the London-based ICE Futures Europe exchange declined 0.7 percent to $110.05 a barrel and New York-traded was little changed. Saudi Arabia’s output rose in February from a 20-month low, according to an official with knowledge of the country’s oil policy. Palladium for immediate delivery fell 0.6 percent to $778.25 an ounce, snapping a four-day rally.
Hedge funds cut bets on a commodity rally to a four-year low on signs of surplus supply in everything from coffee to zinc before Goldman Sachs Group Inc. said prices had fallen too far and investors should buy.
Speculators reduced net-long positions across 18 U.S. futures and options in the week ended March 5 by 9.2 percent to 405,885 contracts, the lowest since March 2009, U.S. Commodity Futures Trading Commission data show. They are the most bearish on copper in four years, and are also betting on declines for coffee, hogs, sugar, soybean oil, wheat and natural gas.
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