Stocks advance with treasuries on economic data as crops surge
U.S. EQUITIES and bonds gained in value, as negative economic data led analysts to speculate that the Federal Reserve was going to postpone the reduction of its monetary stimulus program. Pictured is the New York Stock Exchange.
BLOOMBERG NEWS FILE PHOTO/SCOTT EELLS
By Stephen Kirkland and Nick Taborek Bloomberg News
NEW YORK - U.S. stocks and Treasuries rose after orders for American durable goods fell more than forecast, spurring speculation the Federal Reserve will refrain from a large reduction in stimulus. European shares retreated while crops led commodities higher.
The Standard & Poor’s 500 Index increased 0.2 percent to 1,667.12 at 10:28 a.m. in New York. The yield on 10-year Treasuries dropped two basis points to 2.79 percent while the S&P GSCI Index of 24 raw materials touched a one-month high, with corn and soybeans surging as hot, dry weather in the Midwest threatened to curb U.S. crop prospects. Turkey’s lira slid as much as 0.6 percent to a record against the dollar and India’s rupee sank 1.5 percent.
Durable goods orders in the U.S. fell in July for the first month since March after a report last week showed new home purchases plunged by the most in three years. European Central Bank Governing Council members Panicos Demetriades and Ewald Nowotny split over whether scope remains for further interest-rate cuts, while three regional Federal Reserve presidents differed over the timing for reducing bond buying as central bankers met over the weekend in Jackson Hole, Wyo.
“It’s another data point that indicates a slow recovery,” Eric Teal, who helps oversee $5 billion as the chief investment officer at First Citizens BancShares Inc. in Raleigh, N.C., said by phone. “This is all pointing towards less tapering by the Fed, which is probably bullish for the stock market in general.”
Stocks, bonds and commodities have been whipsawed since May, when Fed Chairman Ben S. Bernanke first signaled the prospect of cuts to stimulus should the economy and job market continue to improve. The Fed will probably pare its $85 billion a month in bond purchases at its Sept. 17-18 meeting, according to 65 percent of economists surveyed by Bloomberg Aug. 9-13.
The ECB still can’t rule out lowering the benchmark rate from the record low of 0.5 percent, Bank of Cyprus Governor Demetriades said in an Aug. 24 interview. Bank of Austria Gov. Nowotny said on Aug. 22 that he doesn’t see “many arguments now for a rate cut” after the recent “stream of good news.”
The S&P 500 advanced 0.5 percent last week. Bookings for goods meant to last at least three years decreased 7.3 percent, the most since August 2012, after a 3.9 percent gain in June, the Commerce Department said Monday in Washington, D.C. The median forecast of economists surveyed by Bloomberg called for a 4 percent drop.
Among stocks moving today, Onyx Pharmaceuticals Inc. jumped 5.6 percent after Amgen Inc. agreed to acquire the cancer-treatment developer in a $10.4 billion transaction. Tyson Foods Inc., the largest U.S. meat processor, fell 4.7 percent after Bank of America Corp. analysts cut its rating on the stock.
Price gains of stocks in the S&P 500 are outpacing profits by the fastest rate in 14 years as the bull market extends beyond the average length of rallies since 1946. The benchmark gauge for U.S. equities has risen 14 percent relative to income over the past 12 months to 16 times earnings, according to data compiled by Bloomberg. Valuations last climbed this fast in the final year of the 1990s technology bubble, just before the index began a 49 percent tumble.
About three shares declined for every two that gained in the Stoxx 600 as volume was 53 percent lower than the 30-day average. U.K. markets were shut for a holiday.
Royal KPN NV increased 3 percent in Amsterdam after winning the support of minority shareholder America Movil SAB for the sale of its German business to Telefonica Deutschland Holding AG after the acquirer agreed to sweeten its bid.
The MSCI Emerging Markets Index increased 0.3 percent. About $1.4 trillion has been erased from the value of emerging-market equities since Bernanke said May 22 that policy makers could scale back bond buying.
Soybeans gained 4.3 percent and corn rallied 4.5 percent.
West Texas Intermediate crude lost 0.5 percent to $105.94 a barrel. Gold was down 0.1 percent at $1,396.26 an ounce while silver climbed 0.6 percent.
The dollar weakened for the first time in four days against the yen, slipping 0.3 percent.
Italian 10-year yields rose seven basis points to 4.40 percent and Spain’s rate increased 1.5 basis points to 4.47 percent.