Bloomberg News

Dow Extends 10-Day Rally, Europe Stocks Rise to 2008 High

March 14, 2013

European Stocks Climb to 4 1/2-Year High Before Brussels Summit

A financial trader walks across the trading floor inside the Frankfurt Stock Exchange in Frankfurt. Photographer: Ralph Orlowski/Bloomberg

The Dow Jones Industrial Average extended the longest rally since 1996 as U.S. jobless claims unexpectedly dropped, while European stocks rose to an almost five-year high as policy makers gathered for a two-day summit. Treasuries pared earlier losses and commodities gained.

The Dow added 0.6 percent in its 10th straight gain and the Standard & Poor’s 500 Index rose 0.6 percent to 1,563.23, about 0.1 percent below its 2007 record, as of 4 p.m. in New York. The Stoxx Europe 600 Index jumped 1.1 percent to the highest level since June 2008. Ten-year Treasury note yields added one basis points to 2.03 percent after jumping five basis points earlier. Australia’s dollar reached a one-month high versus the dollar as payrolls grew the most in almost 13 years.

The number of Americans filing applications for unemployment benefits dropped last week to the lowest level in almost two months, data from the Labor Department showed today. As stocks rallied, the benchmark gauge of U.S. equity options sank to the lowest level in six years amid reduced demand for contracts to protect against losses in stocks.

“We’re feeling a lot better about the general state of the world and the U.S. economy today than we could have said a year ago,” Richard Slinn, investment specialist at JPMorgan Private Bank, which oversees $877 billion in client assets, said from San Francisco. “The market is reflecting fundamental improvement and earnings growth, revenue growth, dividend growth, more than it is price momentum.”

Market Movers

Hewlett-Packard Co., International Business Machines Corp. and JPMorgan Chase & Co. rose more than 1.6 percent to lead the Dow’s gain today.

EBay Inc. (EBAY:US) added 1.6 percent after being raised (EBAY:US) to overweight from equalweight at Evercore Partners Inc. CBS Corp. climbed 2.2 percent after introducing a new iPhone and iPad app. Amazon.com Inc. fell 3.4 percent as JPMorgan Chase & Co. downgraded the shares. E*Trade Financial Corp. lost 8.2 percent after Citadel LLC said it’s selling the rest of its equity stake.

The S&P 500 rose to within two points of its all-time high in 2007. The Dow set a new record high for an eighth straight day.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, slid 4.5 percent to 11.30, its lowest since February 2007. When the S&P 500 reached a record high on Oct. 9, 2007, the VIX finished the day at 16.12. The measure of the cost of options to insure against stock losses declined for four straight years through 2006 and slid to a 13-year low of 9.89 in January 2007 before reversing the losses and jumping to an all- time peak of 80.86 in November 2008 amid the height of the financial crisis.

Banks, Fed

After financial markets closed in New York, the Federal Reserve said Goldman Sachs Group Inc. and JPMorgan Chase & Co. (JPM:US), the world’s biggest trading firms, must submit new capital plans to regulators to address weaknesses in their planning processes found.

The central bank didn’t object to the two New York-based firms’ capital plans, and approved 14 other banks’ proposals, the Fed said today in a statement. Capital plans submitted by Ally Financial Inc. and BB&T Corp. were rejected, while American Express Co. had to revise its submission to win approval.

BB&T (BBT:US) lost 2.7 percent and Goldman Sachs lost 1.3 percent in extended trading as of 5:04 p.m. in New York. Bank of America Corp. jumped 4.6 percent after winning approval to buy back as much as $5 billion in stock in its first repurchase program since the financial crisis.

Senate Probe

JPMorgan lost 2 percent after hours. A Senate probe found that the bank’s Chief Executive Officer Jamie Dimon sought to hide escalating trading losses that surpassed $6.2 billion by misleading investors and dodging regulators as the position deteriorated last year. JPMorgan also announced plans to buy back up to $6 billion in shares and boost its quarterly dividend (JPM:US) to 38 cents a share from 35 cents.

Stocks opened higher and remained up for the entire day after the jobless claims data. First-time claims fell by 10,000 to 332,000 in the week ended March 9, the fewest since mid January, according to the Labor Department. The median forecast of 49 economists surveyed by Bloomberg called for an increase to 350,000. The four-week average declined to a five-year low.

Treasury Auction

Treasuries fell after the U.S. auctioned $13 billion of 30- year bonds amid signs the world’s biggest economy is gathering strength.

Losses were tempered as yields at almost 11-month highs attracted buyers. The sale drew a yield of 3.248 percent, the highest since March 2012, compared with an average forecast of 3.243 percent in a Bloomberg News survey of seven of the Federal Reserve’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of debt offered, was 2.43, the lowest since August, versus 2.74 last month.

The Stoxx 600 (SXXP) headed for a fourth straight week of gains. Assicurazioni Generali SpA rallied 9.4 percent today as Italy’s biggest insurer said fourth-quarter operating income rose 12 percent. HeidelbergCement AG climbed 3 percent as debt declined more than estimated. Home Retail Group Plc (HOME) jumped 12 percent in London after the operator of Homebase and Argos stores raised its full-year profit estimate.

European leaders gathered for a two-day summit today, with euro-area finance ministers meeting separately tomorrow to discuss a bailout for Cyprus. Policy makers may loosen austerity measures as the recession and mounting unemployment in southern Europe overtake the debt crisis as the region’s biggest headache.

‘Risk On’

“The risk-on sentiment is backed on the fact that tail- risks in Europe have diminished,” said Alessandro Bee, an economist and fixed-income strategist in Zurich at Bank Sarasin & Cie AG, which manages the equivalent of $104 billion. “Economic indicators in the U.S are trending up and there’s expectations central banks will keep their accommodative policies.”

Australia’s dollar strengthened as much as 1 percent to $1.0401, the strongest level since Feb. 6, after a government report showed the number of people employed in February jumped 71,500, the biggest monthly increase since July 2000.

The Norwegian krone weakened against 15 of its 16 major peers, dropping more than 1 percent versus the euro for its biggest decline since 2012, after the Norges Bank kept benchmark interest rates unchanged at a sixth consecutive meeting and Governor Oeystein Olsen said the key policy rate may be kept low for longer than previously anticipated.

Spanish Bonds

Spain’s 10-year bonds declined, pushing the yield nine basis points higher to 4.86 percent. A report showed retail sales declined in January and the nation sold 803 million euros ($1.2 billion) of government debt maturing in 2029, 2040 and 2041 at an unscheduled auction.

Natural gas jumped 4 percent and cotton, nickel and wheat added more than 1.6 percent to lead the S&P GSCI Index of commodities up 0.5 percent.

The MSCI Emerging Markets Index (MXEF) slipped 0.1 percent, falling for a fourth day, as benchmark gauges in Indonesia and the Philippines dropped more than 1 percent. India’s Sensex advanced for the first time in four days, climbing 1.1 percent. Brazil’s Bovespa lost 0.2 percent. South Korea’s won weakened to a five-month low versus the dollar after the central bank left interest rates unchanged.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net; Sarah Pringle in New York at springle1@bloomberg.net

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


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Companies Mentioned

  • EBAY
    (eBay Inc)
    • $51.12 USD
    • 0.33
    • 0.65%
  • JPM
    (JPMorgan Chase & Co)
    • $58.74 USD
    • 0.68
    • 1.16%
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