The dollar rose for a sixth day while Treasuries slid as faster-than-forecast growth in manufacturing fueled speculation the Federal Reserve will taper bond purchases. U.S. stocks climbed after a two-day drop while the S&P GSCI Index of commodities sank to a four-month low.
The Bloomberg U.S. Dollar Index climbed 0.4 percent as of 4 p.m. in New York. Ten-year Treasury yields added seven basis points to 2.62 percent, the highest level in two weeks. The Standard & Poor’s 500 Index (SPX) rose 0.3 percent to 1,761.64. Crude slid 1.8 percent, dropping below $95 a barrel for the first time since June. Heating oil, gold and natural gas lost at least 0.7 percent as the S&P GSCI Index tumbled 1.8 percent. The euro weakened 0.7 percent to $1.3489 on speculation the European Central Bank will reduce rates.
Manufacturing grew in October at a faster pace than forecast, showing U.S. factories were a source of strength for the economy at the start of the fourth quarter. Fed policy makers said Oct. 30 that the economy showed signs of “underlying strength” even as they maintained their $85 billion of monthly asset purchases. The ECB may cut rates next week after data yesterday showed the region’s inflation declined to the least since November 2009, according to Bank of America Corp., UBS AG and Royal Bank of Scotland Group Plc.
“There’s some concern clearly that the economic data is getting better and we might get tapering in December,” Eric Green, director of research and fund manager at Penn Capital Management, said by phone. The Philadelphia-based firm oversees about $7 billion. “As you get positive economic data points, those that were concerned about the taper get more concerned.”
The Institute for Supply Management’s index climbed to 56.4, the highest since April 2011. Readings above 50 indicate growth. The median forecast in a Bloomberg survey of economists was 55. China’s official manufacturing Purchasing Managers’ Index rose more than estimated in last month. A separate purchasing managers’ index on China from HSBC Holdings Plc and Markit Economics also topped projections.
Fed Bank of St. Louis President James Bullard said gains in the labor market since September 2012 could warrant a cut in the Fed’s monthly bond purchases. Charles Plosser, president of the Fed Bank of Philadelphia who has opposed the Fed’s current round of stimulus, said inflation will be a concern as the central bank unwinds its balance sheet following unprecedented asset purchases.
Fed stimulus has helped propel the S&P 500 higher by more than 160 percent from a 12-year low in 2009. Benchmark indexes reached record highs on Oct. 29.
Global equities completed the biggest back-to-back monthly gain in almost two years, beating all other assets in October, as U.S. lawmakers avoided a debt default and investors speculated the Fed will maintain stimulus.
The MSCI All-Country World Index of stocks in 45 markets climbed 4.1 percent including dividends in October, bringing the two-month advance to 9.5 percent. The S&P 500 rose 4.6 percent, the most since July. Bonds of all types returned 0.9 percent on average in October, the most since April, according to Bank of America Merrill Lynch’s Global Broad Market Index. The Bloomberg Dollar Index fell less than 0.1 percent last month after touching its lowest level since February, while the S&P GSCI Total Return Index of 24 commodities lost 1.4 percent.
U.S. equity exchange-traded funds drew $18.2 billion in October, the most in three months and the third-highest amount since 2010, according to data compiled by Bloomberg. About $110.6 billion has been absorbed this year, putting the stock ETFs on pace for the highest flows since the records began in 2000.
Equities climbed last month amid better-than-estimated corporate earnings. Of the 368 companies that have reported results this season, 75 percent exceeded analysts’ predictions for profit, while 53 percent beat sales estimates, data compiled by Bloomberg showed. Profits for members of the gauge probably increased 4.1 percent in the third quarter as sales climbed 2.9 percent, according to analysts’ estimates compiled by Bloomberg.
Seven of the 10 main groups in the S&P 500 advanced today, as utility, industrial and health-care stocks led gains. JPMorgan Chase & Co., Boeing Co. and Pfizer Inc. added at least 1.6 percent for the biggest increases in the Dow Jones Industrial Average.
American International Group Inc. (AIG:US), the insurer that repaid a U.S. rescue last year, fell 6.5 percent as premium revenue declined at the property-casualty division. Barrick Gold Corp., the world’s largest producer of the metal, slid 7.1 percent after saying it plans to trim debt by raising as much as $3.45 billion in a share sale.
Energy companies in the S&P 500 lost 0.3 percent as a group for the biggest decline. Chevron Corp. slid 1.6 percent as it reported profit below estimates as weaker refining margins eroded gains from higher commodity prices and output from wells. First Solar Inc. rallied 18 percent after the largest U.S. solar-panel manufacturer said third-quarter profit almost doubled.
The S&P 500 is up almost 24 percent in 2013, poised for its best yearly gain in a decade. The benchmark index for U.S. stocks traded for about 16.8 times reported earnings at its last record on Oct. 29, the highest valuation in more than three years.
“We have gotten pretty overbought and we were due for some pause, which is what we have been getting since the Fed statement,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in an interview.
The euro declined against 13 of its 16 major counterparts. The 17-nation currency dropped for the fifth day against the dollar and lost 2.3 percent for the week, its worst drop since July 2012.
Bank of America, UBS and RBS (RBS) predict the ECB will cut its main refinancing rate by 25 basis points on Nov. 7. BNP Paribas SA, Societe Generale SA, JPMorgan Chase & Co. and Scotiabank forecast a reduction in December, when the central bank will publish new economic projections. The ECB last lowered its benchmark rate on May 2 to a record 0.5 percent.
West Texas Intermediate slid to $94.61 a barrel on surging U.S. stockpiles and as the dollar gained versus the euro, curbing commodity demand from investors. Brent for December settlement dropped 2.7 percent to $105.91 a barrel.
Gold reached a two-week low and cotton fell to the lowest since January.
About two shares declined for each that advanced in the Stoxx 600. The gauge dropped 0.3 percent for the day, leaving the gauge up 0.4 percent for the week.
Renault SA, France’s second-biggest carmaker, lost 5 percent after its partner Nissan Motor Co. cut its full-year profit forecast. RBS fell 7.5 percent after forecasting a “substantial” full-year loss. Vodafone Group Plc rose 3.6 percent after people familiar with the matter said AT&T Inc. is exploring a takeover of Europe’s biggest mobile carrier as soon as next year.
The MSCI Emerging Markets Index fell for a second day, slipping 0.6 percent. Thailand’s benchmark stock index slid 1 percent to an almost four-week low as a bill granting amnesty for political offenses spurred protests in Bangkok. The Jakarta Composite index lost 1.7 percent and the rupiah weakened for a fifth day in its worst week since August as the nation’s trade balance unexpectedly swung back to a deficit in September.
The Shanghai Composite Index advanced 0.4 percent, capping its first weekly gain in three weeks. The Purchasing Managers Index rose to 51.4, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today. That compares with 51.1 in September and the 51.2 median estimate in a Bloomberg News survey of analysts.
South Korea’s Kospi index added 0.5 percent after a report showed manufacturing expanded for the first time since May.
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