U.S. stocks climb to record high as crude surges, dollar falls

NEW YORK – U.S. stocks rose toward their record high, led by energy companies, as oil jumped on optimism OPEC will agree to cut output. The dollar halted its longest winning streak versus the euro.

The S&P 500 Index surpassed its Aug. 15 closing high of 2,190.15, the Dow Jones Industrial Average traded near its all-time peak, and the Russell 2000 Index rose for a 12th day in its longest rally since 2003. Oil climbed to a three-week high as Iran signaled optimism that OPEC will agree to a supply-cut deal and Iraq said it will offer new proposals to help bolster unity before next week’s meeting in Vienna. The greenback’s decline versus the shared currency was its first in 11 days. Treasuries rose.

The new milestone for the S&P 500 arrived as companies ended a five-quarter profit slump and Donald Trump’s election fueled optimism that his plans to cut taxes and boost fiscal spending will benefit industries more geared toward economic growth. Acknowledging the strength in the economy, Federal Reserve Chair Janet Yellen said Thursday that the central bank is close to lifting interest rates, comments that sent Treasuries lower and yields on the 10-year note toward 2.25 percent.

“There’s optimism that it’s more likely that Trump is going to put us on an economic fast track versus Clinton,” said Terry Morris, manager director of equities at BB&T Institutional Investment Advisors in Wyomissing, Penn. “The election had something to do with this, and I also think there’s some short covering going on. People that were hedging the election had to rush to cover after the news, and I think generally the perception is the economy is starting to pick up as the Fed is likely to raise rates in December.”

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Investors have boosted bets for tighter monetary policy since Donald Trump’s election win, on speculation his policies will spur growth and increase inflation. After Yellen said last week the central bank is close to raising rates, traders are now pricing in a 98 percent chance of a move in December. If the Fed doesn’t act as expected, it may bring on more market turmoil, says Seven Investment Management’s Ben Kumar.

Stocks

The S&P 500 rose 0.5 percent to 2,193.30 at 12:25 p.m. in New York. The Dow Jones Industrial Average advanced 47.63 points to 18,915.56 to an all-time high. The Russell 2000 Index rose 0.1 percent.

“It’s a push on the upper end of the equity markets due to this renewed belief that there’s tax cuts and stimulus spending coming in 2017 and 2018,” said Chad Morganlander, a money manager at Stifel, Nicolaus & Co. in Florham Park, N.J., where he helps oversee about $172 billion. “The overall equity markets are taking a cue from that and they are trading on the belief that earnings will move higher as well as revenues in 2017.”

Energy shares rallied Monday, following crude higher. Chesapeake Energy Corp. and Murphy Oil Corp. led gains. Tyson Foods Inc. tumbled after posting earnings that missed estimates and appointing Tom Hayes to succeed Donnie Smith as chief executive officer.

The Stoxx Europe 600 Index rose 0.3 percent, erasing an earlier slide of as much as 0.8 percent, amid gains in energy producers and miners as commodities climbed. Among stocks moving on corporate news, Mitie Group Plc, which provides office cleaners, tumbled after saying it sees earnings below a previous forecast. Essentra Plc sank after the U.K. maker of plastic caps cut its operating profit forecast.

MSCI’s emerging-market gauge rose 0.6 percent.

Commodities

The Bloomberg Commodity Index, which measures returns on raw materials, advanced 2.2 percent, set for its first two-day gain since Oct. 24.

Oil rose as much as 4.2 percent in New York, adding to last week’s 5.3 percent gain. Iranian Oil Minister Bijan Namdar Zanganeh said it’s “highly probable” OPEC will reach a consensus, according to comments published by Shana news service. Iraq will make proposals at the meeting to help reach an agreement, Oil Minister Jabbar Al-Luaibi said. Goldman Sachs Group Inc. said it’s got a “ tactically bullish” outlook on a “stronger OPEC-cut rationale.”

“Market players are positioning themselves for higher prices, and oil will be in the $50 to $55 range if there is a deal,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “OPEC members are building a lot of expectations and taking too much exposure to let a deal fail.”

Copper rallied and nickel rebounded from a two-week low as metal markets renewed their advance on stronger oil prices and optimism over demand in China and the U.S.

Currencies

The euro advanced 0.2 percent to $1.0611 halting the 10-day drop that saw Europe’s single currency weaken 5 percent. The Bloomberg Dollar Spot Index fell for the first time in four days, slipping 0.3 percent.

South Africa’s rand led gains among major currencies as the country proposed labor law reforms a few days before a credit-rating review. The currencies of Colombia, Russia and Brazil gained at least 0.9 percent.

Bonds

U.S. two-year note yields were little changed at 1.06 percent, according to Bloomberg Bond Trader data. Benchmark 10-year yields fell four basis points, or 0.04 percentage point, to 2.31 percent.

Investors who buy at Monday’s U.S. two-year note sale risk losing money as the Federal Reserve raises interest rates, according to Nomura Holdings Inc., one of the 23 companies that trade with the central bank.

“You’d probably want to be a little bit cautious going into this auction, given the fact that the market continues to sell off,” said John Gorman, head of non-yen rates trading for Asia and the Pacific at Nomura in Tokyo. “There are some people expecting three hikes next year. The market’s only pricing in maybe one.” The two-year yield will rise to 1.25 percent in six months, he said.

Two-year yields, among the most sensitive to what the Fed does with its benchmark, climbed earlier to 1.08 percent, approaching the highest level since 2010. Bonds have slumped and yields surged this month on expectations President-elect Donald Trump’s spending plans will lead to faster inflation. The Fed will increase rates for the first time in a year when it meets next month, futures contracts indicate.

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