The Standard & Poor’s 500 Index rose for the first time in three days as optimism global economic growth is accelerating offset disappointing company earnings. The yen weakened against the dollar and gold slipped while natural gas jumped as snow blanketed the U.S. Northeast.
The S&P 500 (SPX) added 0.3 percent to 1,843.80 by 4:23 p.m. in New York, with more than three stocks rising for every two that fell on U.S. exchanges. The Stoxx Europe 600 Index pared gains after touching a six-year high. Chinese shares jumped 1.8 percent as money-market rates fell the most in four weeks. The yen lost 0.2 percent as the Bloomberg Dollar Spot Index extended gains from a five-month high. Gold fell 1 percent as Brent oil snapped a three-day drop. Gas climbed 2.4 percent.
The International Monetary Fund raised its forecast for global growth this year as expansion in the economies of the U.S. and the U.K. quicken. Verizon Communications Inc., Johnson & Johnson and Travelers Cos. lost more than 1 percent today, dragging the Dow Jones Industrial Average down 0.3 percent after reporting earnings. The People’s Bank of China added funds to the financial system yesterday and expanded access to a lending facility for banks after money-market rates jumped.
“Keeping your confidence in stocks is still the wise thing to do, though you are very vulnerable if the macro picture does not improve as expected,” said Dirk Thiels, who helps oversee the equivalent of $88 billion as head of investment management at KBC Asset Management NV in Brussels. “Chinese growth remains very respectable and they are clearly taking structural measures to rebalance their economy.”
The global economy will expand 3.7 percent this year, compared with an October estimate of 3.6 percent, the IMF said in revisions to its World Economic Outlook released in Washington today. U.S. gross domestic product will expand 2.8 percent, compared with 2.6 percent; Japan will gain 1.7 percent versus 1.2 percent; and the U.K. will increase 2.4 percent from 1.9 percent, the report showed.
China, the world’s second-largest economy, is projected to grow 7.5 percent, faster than the 7.3 percent estimated in October, though down from 7.7 percent last year, according to the report.
Investors are the most upbeat about the global economy in almost five years, encouraged by the U.S.-led revival of industrialized economies, according to a Bloomberg Global Poll.
On the eve of the World Economic Forum’s annual meeting in Davos, Switzerland, 59 percent of Bloomberg subscribers surveyed last week said the economic outlook is improving. That’s up from 33 percent in November and marks the most optimistic result since the poll began in July 2009. Of the Bloomberg subscribers surveyed, 72 percent said that the U.S. economy is improving, up from 53 percent a year ago.
Jeff Altman and John Paulson, two of last year’s best-performing hedge-fund managers, predict that stocks will continue their rally in 2014 even as the bull market approaches its sixth year.
They’re among a number of top money managers betting markets are robust enough to weather a gradual reduction in the pace of the Federal Reserve’s asset purchases as the central bank signaled it will keep interest rates at their current low for the foreseeable future, according to interviews with more than half a dozen investors.
“The wind will continue to be at the markets’ backs with the Fed,” said Altman, head of the $3.2 billion Owl Creek Asset Management LP.
Stocks pared gains of as much as 0.6 percent today as the S&P 500 approached 1,850, a level that has halted the index’s advance three times in the past month. The benchmark index reached an intraday high of 1,850.84 Jan. 15.
A five-year rally that lifted the S&P 500 up more than 170 percent from a bear-market low has boosted equity valuations to near the most expensive since 2009. The S&P 500 trades at 15.6 times the estimated earnings of its members, more than the five-year average multiple of 14.1, data compiled by Bloomberg show.
J&J declined 1.1 percent today after forecasting earnings that trailed estimates, while Verizon slipped 1.3 percent after saying subscriber growth slowed from a record. Dow Chemical Co. rallied 6.6 percent after Daniel Loeb’s hedge fund Third Point LLC took a stake. Alcoa Inc. jumped 6.8 percent after JPMorgan Chase & Co. recommended buying the stock.
Fourteen companies in the S&P 500 including Texas Instruments Inc. were scheduled to report financial results today. Per-share profit for companies in the benchmark probably climbed 6 percent in the fourth quarter, while sales increased 2.2 percent, according to analysts surveyed by Bloomberg.
Of the 61 S&P 500 members that have reported results so far this season, 67 percent have beaten estimates for profit and 67 percent have exceeded sales projections, according to data compiled by Bloomberg. International Business Machines Corp. posted operating profit that exceeded analysts’ estimates after markets closed.
“In the short term, continued earnings growth is particularly important,” James W. Gaul, a portfolio manager at Boston Advisors LLC, which oversees about $2.5 billion from Boston, said by phone. “We are no longer cheap, perhaps not even fairly valued at this point. Investor sentiment is quite optimistic. We need some positive news to get us going.”
Yields on 10-year Treasuries were little changed at 2.83 percent after markets were closed yesterday for the Martin Luther King holiday.
Europe’s Stoxx 600 rose 0.1 percent, paring an earlier gain of as much as 0.6 percent. The index has climbed 2.3 percent this month. Unilever NV (UNA) rose 2.3 percent after the maker of Magnum ice cream and TRESemme shampoo reported fourth-quarter sales growth exceeding estimates.
SAP AG fell 1.7 percent after the largest maker of business-management software delayed its profitability target. Alstom SA tumbled 14 percent after the French maker of trains and power equipment reduced its operating-margins outlook.
The MSCI Emerging Markets Index was little changed as it swung between gains and losses throughout the day. The Shanghai Composite Index climbed 0.9 percent, rebounding from the lowest close since July.
China’s central bank supplied money to the largest commercial banks through its Standing Lending Facility yesterday and conducted 255 billion yuan ($42 billion) of reverse-repurchase agreements today to meet demand for cash before the Lunar New Year. The monetary authority is also allowing small-and medium-sized banks in 10 regions to tap its SLF on a trial basis. The seven-day repurchase rate, a gauge of interbank funding availability, jumped 153 basis points yesterday to 6.32 percent. It was fixed at 5.44 percent today.
Turkey’s currency slid to a record 2.2691 per dollar, before paring losses and trading 0.5 percent weaker at 2.2519. The central bank kept all three interest rates in its three-tiered corridor unchanged. Hungary’s forint slipped 0.3 percent versus the euro and the BUX index of stocks gained 1 percent. The central bank lowered its two-week deposit rate to a record 2.85 percent.
Thailand’s SET (SET) Index rose for the first time in three days, gaining 0.2 percent. Thai Prime Minister Yingluck Shinawatra declared a 60-day state of emergency in Bangkok as she sought to combat violent attacks that threaten to derail elections scheduled for Feb. 2.
The yen slipped to 104.32 per dollar and lost 0.2 percent against the euro, halting a four-day advance. Bloomberg’s dollar index, which tracks the U.S. currency against 10 major counterparts, added 0.1 percent to the highest level since September. The euro was little changed at $1.3560.
Portugal’s 10-year bond yield briefly fell below 5 percent for the first time since August 2010, before paring declines to 4 basis points and trading at 5.07 percent.
Bayer AG, the inventor of Aspirin, is marketing its biggest bond sale in Europe since at least 2009 after borrowing costs fell to the lowest in more than seven months. The average yield on investment-grade bonds in euros dropped 16 basis points this month to 1.97 percent, the lowest since June 5, Bank of America Merrill Lynch index data show.
Gold for immediate delivery declined for the first time in four days, losing 1.1 percent to $1,241.43 an ounce. Brent increased 0.6 percent to $107 a barrel after the International Energy Agency raised its forecast for global oil consumption on a strengthening economy. West Texas Intermediate added 0.7 percent to $94.99 a barrel in New York.
Natural gas futures climbed to the highest price in almost four weeks as a winter storm bringing heavy snow and frigid weather to the U.S. East Coast stoked demand for the heating fuel. Gas for February delivery advanced 10.5 cents to $4.431 per million British thermal on the New York Mercantile Exchange, the highest settlement price since Dec. 26.
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