Stocks rose, sending the Dow Jones Industrial Average to a record, and Treasuries climbed as Federal Reserve officials said weakness in the U.S. economy warranted continued stimulus. Oil led commodities up from a four-month low while the yen and dollar weakened.
The Dow advanced 128.66 points, or 0.8 percent, to 15,746.88 by 4:15 p.m. in New York. The Standard & Poor’s 500 Index (SPA) added 0.4 percent after earlier touching a record closing high. Ten-year Treasury yields fell three basis points to 2.64 percent. The dollar declined against 12 of 16 major peers while the yen weakened against all 16. The S&P GSCI gauge of 24 commodities rallied 0.5 percent as New York-traded oil rose the most in five weeks on an increase in U.S. gasoline demand.
U.S. growth and payrolls figures this week may help investors gauge the outlook for Fed policy as two papers from central bank officials said the level of slack in America’s economy justifies an accommodative stance. Company earnings fueled a global stock rally after ING Groep NV, the biggest Dutch financial-services company, reported net income that beat analysts’ estimates and Toyota Motor Corp. (7203), the world’s largest automaker, raised its full-year profit forecast by 13 percent.
“The central bank has decided they will reward risk behavior and that’s what we’re going to get,” Bill Mann, chief investment officer at Motley Fool Asset Management in Alexandria, Virginia, said in a phone interview. His firm manages $560 million. “The market will keep hitting their highs until the stimulus reverses itself.”
The S&P 500 has rallied about 24 percent in 2013, set for its best yearly gain in a decade. The benchmark index for U.S. stocks traded at about 16.8 times member company reported earnings at its last record reached Oct. 29, the highest valuation in more than three years. The Stoxx Europe 600 Index is up 16 percent this year while the MSCI All-Country World Index has gained 17 percent.
The S&P 500 rebounded from yesterday’s 0.3 percent drop as eight of its 10 main industry groups advanced, led by utility, telephone, consumer-staples and technology companies.
Microsoft Corp. climbed 4.2 percent as Nomura Holdings Inc. said the software company may exit its money-losing consumer business under a new chief executive officer.
Ralph Lauren Corp. (RL:US) climbed 5.5 percent after the apparel maker boosted the lower end of its sales forecast and increased dividends. Tesla Motors Inc. (TSLA:US) tumbled 14 percent, leading the Nasdaq-100 Index 0.1 percent lower, as vehicle sales missed some analysts’ estimates. Abercrombie & Fitch Co. slumped 13 percent after posting sales that trailed expectations.
The Conference Board’s index of U.S. leading indicators, a gauge of the outlook for the next three to six months, increased 0.7 percent in September, data today showed. The median forecast of economists surveyed by Bloomberg called for a gain of 0.6 percent.
A government report tomorrow is forecast to show the U.S. economy grew at a 2 percent annualized rate in the third quarter, compared with a 2.5 percent increase in the previous three months. Economists predict data Nov. 8 will show payrolls climbed by 120,000 in October and the unemployment rate increased to 7.3 percent from 7.2 percent in the previous month, according to a separate survey.
Fed policy makers last week signaled diminishing concern over higher borrowing costs as they maintained their $85 billion-a-month bond buying program and sought more evidence of sustained growth before tapering the record stimulus. The Fed won’t reduce the pace of purchases until its March 18-19 meeting, according to the median estimate in a Bloomberg survey of economists conducted Oct. 17-18.
William English, head of the Fed’s Division of Monetary Affairs, wrote that the strategy of not raising interest rates when unemployment is above 6.5 percent has provided effective stimulus, and that an even lower threshold could be helpful. A paper by David Wilcox, the research and statistics chief, says that slack in the economy argues for loose policy at a time of contained expectations for inflation.
The U.S. Treasury will sell $10 billion to $15 billion of its first floating-rate notes Jan. 29. The debt will have a two-year maturity and be the Treasury’s first new security in 17 years, the department said today in its quarterly refunding announcement.
Note and bond sales next week will total $70 billion, the lowest since February 2009 and less than the $72 billion auctioned last quarter, the Treasury said.
The Stoxx 600 advanced 0.4 percent to the highest level since May 2008. ING jumped 3.5 percent. Alstom SA (ALO), the French maker of power equipment and trains, rallied 5.8 percent after operating profit topped estimates. Vestas Wind Systems A/S surged 15 percent to a two-year high after the world’s largest wind-turbine maker boosted its outlook for 2013.
The euro climbed 0.4 percent to $1.3521 and added 0.5 percent versus the yen as data showed the region’s services output increased more than initially estimated, boosting speculation that the European Central Bank will refrain from cutting interest rates tomorrow.
The euro may strengthen to a two-year high versus the dollar should it hold a key level of support, according to Bank of America Corp., citing technical indicators.
The 17-nation currency’s ability to not weaken beyond $1.3412 to $1.3452 will confirm a longer-term bullish trend for the euro, MacNeil Curry, head of foreign-exchange and interest-rates technical strategy in New York at Bank of America Merrill Lynch, wrote in a client note yesterday. Should the euro can appreciate beyond its October high to $1.3835, it will test $1.40, which would be the strongest level since October 2011.
Japan’s Topix Index (TPX) advanced for the first time in four days, rising 0.8 percent. Toyota increased 0.5 percent as NHK reported the company would raise its earnings forecast. The company lifted its full-year profit projection by 13 percent in a statement as Tokyo markets closed.
Japan’s yen weakened the most against the Norwegian and Swedish currencies, losing at least 0.7 percent. The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major peers, fell 0.3 percent, declining for the second time in nine days.
German manufacturing orders, adjusted for seasonal swings and inflation, jumped 3.3 percent from August, when they fell 0.3 percent, the Economy Ministry said today. Economists forecast a gain of 0.5 percent, according to the median of 37 estimates in a Bloomberg News survey.
Italian bonds reversed early gains, sending 10-year yields up four basis points, or 0.04 percentage point, to 4.21 percent. The nation sold 22.3 billion euros ($30 billion) of government inflation-linked bonds aimed at retail investors, setting a new record and allowing the Treasury to potentially cut the size of bond auctions for the rest of the year.
The yield on 10-year Portuguese bonds dropped 20 basis points to 5.89 percent.
The MSCI Emerging Markets Index was little changed after a four-day slump. Egypt’s EGX 30 Index jumped 2.4 percent to the highest level since January 2011 as trading resumed after a holiday yesterday and the trial of deposed President Mohamed Mursi was adjourned until January. The Shanghai Composite Index dropped 0.8 percent before the start of a Communist Party meeting later this week.
The S&P GSCI index rebounded from the lowest close since June 26 reached yesterday, climbing for the first time in seven days. West Texas Intermediate oil gained 1.5 percent, the most in five weeks, to $94.80 a barrel. Gasoline jumped 1.2 percent and natural gas increased 1 percent.
The Energy Information Administration reported gasoline consumption in the U.S. climbed 2.6 percent last week to 9.29 million barrels a day. Supplies decreased by 3.76 million barrels, more than nine times the 400,000-barrel decrease forecast by analysts in a Bloomberg survey. Oil stockpiles jumped for a seventh week.
Gold futures gained 0.7 percent, the biggest advance in almost two weeks, to settle at $1,317.80 an ounce as a weakening dollar signaled investors are speculating tomorrow’s government reports will indicate sluggish U.S. economic growth. Palladium extended a rally to the highest price since August.
Coffee fell to the lowest level since December 2008 on speculation bigger crops in Brazil, the world’s largest grower, will compound a global glut. Sugar and cocoa also declined, while cotton and orange juice gained.
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