The Standard & Poor’s 500 Index rose the most in five months while Treasuries fell, as speculation that Russia is de-escalating tension in Ukraine outweighed concern about crises in the Middle East. The yen strengthened.
The S&P 500 added 1.2 percent at 4 p.m. in New York, as its best rally since March 4 erased a decline for the week. Futures contracts on the Euro Stoxx 50 rose 0.4 percent after the Stoxx Europe 600 Index capped its first back-to-back weekly losses since March. Ten-year Treasury yields climbed one basis point after earlier sinking to the least in more than a year. The yen rose 0.1 percent versus the dollar.
Russia’s Defense Ministry said warplanes had ended drills in the region near Ukraine while RIA Novosti earlier reported that Russia offered to mediate between the government in Ukraine and the separatists that it’s battling. President Barack Obama approved airstrikes in Iraq, and rocket attacks marked the end of a cease-fire between Israel and Hamas. Brent crude fell on speculation the airstrikes will stabilize supplies from OPEC’s second-largest producer.
“For the most part the market has been pretty resilient over the last week or so,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in an interview. “It has been able to shrug off a lot of negatives and not go lower than it had.”
The S&P 500’s rally erased declines in the previous four sessions and pared its drop from a record on July 24 to 2.8 percent. The gauge yesterday came within 60 points of wiping out its advance for 2014 as it closed below its average price for the past 100 days for the first time since April.
U.S. stocks climbed amid speculation that recent declines had been excessive. Almost 80 percent of stocks in the S&P 500 closed yesterday below their average price of the past 50 days, the most since 2012, according to data compiled by Bloomberg. All but one of the 10 main industries in the index was oversold, a report from Bespoke Investment Group LLC showed.
“When you see the geopolitical news in Russia and the Middle East, it’s horrible from a humanitarian point of view for U.S. equities, but how bad is it for U.S. economic fundamentals?” Michael Purves, chief global strategist and head of equity derivatives research at Weeden & Co. in Greenwich, Connecticut, said in a phone interview. “It’s pretty distant. We’ve had a big selloff since the highs in July and in my estimations, this has been a pretty orderly retreat spurred by overstretched market conditions.”
All 10 main industries in the S&P 500 advanced today. Among stocks moving, Gap Inc. (GPS:US) jumped 6.4 percent after reporting sales that topped estimates. Nvidia Corp. gained umped 8.8 percent as earnings topped forecasts. Monster Beverage Corp. climbed 6.7 percent after the maker of energy drinks posted second-quarter earnings that exceeded analysts’ estimates.
The easing of tension in Ukraine overshadowed reports that the U.S. carried out airstrikes against militants from Islamic State in Iraq. The escalation in U.S. involvement in the country comes as the extremist group that’s conquered swaths of northern Iraq since June extended its advance. Israeli aircraft pounded the Gaza Strip today after militants fired rockets into the country’s south, shattering a cease-fire.
The conflict in Iraq has spared production in Iraq’s south, home to about three-quarters of its crude output. Brent for September settlement slid 42 cents, or 0.4 percent, to $105.02 a barrel on the London-based ICE Futures Europe exchange.
The geopolitical conflicts had earlier boosted demand for haven assets. The U.S. 10-year yield touched 2.35 percent, the lowest since June 2013, before erasing losses. Germany’s 10-year bonds advanced, leaving the rate lower for a fifth week, the longest run since June 2012. Borrowing costs also fell to record lows from France to Finland amid a surge in the euro area’s higher-rated government bonds.
The Stoxx 600 fell to the lowest level since March, capping a 2.1 percent slide this week after sinking 2.9 percent in the prior period. Germany’s DAX Index dropped as much as 11 percent today from its July 3 record, while France’s CAC 40 Index lost as much as 10 percent since its six-year high in June.
The MSCI Emerging Markets Index retreated 0.4 percent today to cap a second weekly decline. Russia’s Micex jumped 1.8 percent, rebounding from a three-month low to halt a three-day decline.
Industrial metals slid in London. Zinc for delivery in three months dropped 1.5 percent to settle at $2,295 a metric ton. Lead fell 1.1 percent to $2,240 a ton. Nickel, copper and aluminum declined, while tin was unchanged.
To contact the reporters on this story: Elena Popina in New York at email@example.com; Jeremy Herron in New York at firstname.lastname@example.org
To contact the editors responsible for this story: Lynn Thomasson at email@example.com Jeremy Herron, Stephen Kirkland