BLBG:Stocks, Commodities Climb Amid Bets China to Spur Growth as Dollar Weakens
Stocks (MXWD) surged, sending the Standard & Poor’s 500 Index to the highest level in five months, and commodities rose for a third day amid speculation China may act to spur growth. Treasuries fell and the dollar weakened.
The S&P 500 added 0.9 percent to close at 1,292.08 at 4 p.m. in New York, its highest level since July 29, and the Dow Jones Industrial Average increased 69.78 points, or 0.6 percent, to 12,462.47. The Shanghai Composite Index (SHCOMP) jumped 2.7 percent to extend its biggest three-day advance in 15 months. The dollar weakened against 15 of 16 major peers. Ten-year Treasury note yields climbed one basis point to 1.97 percent. The S&P GSCI (SPGSCI) gauge of 24 materials rose 0.9 percent as cocoa, silver and copper rallied more than 3 percent to lead gains.
China’s import growth slowed to a two-year low in December, government trade data showed today, fueling bets on monetary easing. Laszlo Birinyi, whose prediction the bull market would weather a five-month retreat came true in October, said U.S. stocks (MXWD) will keep climbing in 2012 and Steve Leuthold, chief executive officer and founder of the Leuthold Global Fund, said he is bullish on U.S. stocks in the near future.
“China is likely to ease monetary and fiscal policies in the first half of this year,” David Kelly, who helps oversee $394 billion as chief market strategist for JPMorgan Funds in New York, said in a telephone interview. “Their economy is growing more slowly than it did. The U.S. economy seems to have momentum. Most companies will surprise on the upside and markets will react positively to that provided that there’s not any further negative news coming from the rest of the world.”
Earnings Season
Alcoa Inc. (AA), the biggest U.S. aluminum producer and first company in the Dow to report results the latest period, had a fourth-quarter loss excluding restructuring costs of 3 cents a share, matching the average projection from 18 estimates compiled by Bloomberg. Sales rose 6 percent to $5.99 billion, topping the $5.7 billion estimate in a Bloomberg survey. The company reported results yesterday after financial markets closed. Its shares rallied as much as 4.5 percent today before paring gains and closing up 0.2 percent at $9.44.
The S&P 500 has finished the earnings season higher 75 percent of the time when Alcoa rises in the session after reporting its results, according to a Bespoke Investment Group study of 34 quarters going back to 2003. Companies in the S&P 500 may report earnings grew 6 percent in the quarter from a year earlier, the smallest quarterly gain since September 2009, according to projections compiled by Bloomberg.
“The sentiment in the markets improved as the earnings season kicked off,” said Anita Paluch, a senior sales trader at Gekko Global Markets Ltd. in London. That’s “shifting the attention from the European troubles for a while.”
8% Gain Predicted
Commodity producers, industrial companies and financial shares led gains in all 10 of the main industries in the S&P 500, climbing at least 1.3 percent. Caterpillar Inc., Bank of America Corp. and United Technologies Corp gained at least 2.6 percent to lead the Dow higher. Tiffany & Co. tumbled 10 percent after the second-largest luxury jewelry retailer reduced its annual earnings forecast.
U.S. equities will advance at least 8 percent as improving corporate profits force bears to capitulate, according to Birinyi, who manages $400 million in Westport, Connecticut. Leuthold, who like Birinyi advised buying stocks as the S&P 500 approached a 12-year low in March 2009 before rebounding more than 100 percent, said an improvement in momentum made him more optimistic and he favors health-care and biotechnology stocks.
The Stoxx Europe 600 Index added 1.8 percent as Bayerische Motoren Werke AG and Daimler AG paced gains in automakers. Debenhams Plc, the U.K.’s second-largest department-store chain, rallied 9 percent after reporting holiday sales that beat analyst estimates. Larger rival Marks & Spencer Group Plc climbed 3 percent as revenue increased.
Philips Slumps
Royal Philips Electronics NV (PHIA) sank 4.7 percent. The world’s biggest maker of light bulbs said fourth-quarter profit dropped by about 45 percent, held back by sluggish demand for health- care equipment in Europe. Software AG, Germany’s second-largest software maker, plunged 20 percent for the biggest drop in almost a decade after earnings and sales missed analysts’ estimates.
The MSCI Emerging Markets Index (MXEF) advanced 2 percent. The Shanghai Composite Index climbed 6.4 percent in three days. Benchmark gauges in Brazil, Russia, India, Turkey, South Korea and Taiwan climbed at least 1.2 percent today.
“Policy makers in Beijing are very much focused on downside risks,” said Andrew Pease, a Sydney-based senior investment strategist for the Asia-Pacific region at Russell Investment Group, which oversees $137.6 billion of assets. “It would be a reasonable expectation that there’s a lot of monetary easing to come in the first half of the year.”
Oil, Orange Juice
Oil in New York jumped 0.9 percent to $102.24 a barrel, the first increase in four days, on renewed concern that Middle East tensions will disrupt supplies. Copper advanced 2.8 percent. Imports of the metal by China, the world’s biggest buyer of copper, surged to a record. Aluminum climbed as much as 2.7 percent to $2,165 a metric ton in London.
Orange-juice futures rose the most in five years, jumping the 20-cent exchange limit, or 11 percent, to $2.0775 a pound, on speculation that citrus groves in Florida suffered more frost damage than expected last week, with some forecasters predicting more cold weather.
Cocoa Surges
Cocoa futures jumped 7.5 percent and rose 15 percent in two days, the biggest two-day gain in almost 11 years, after a nationwide strike spurred concerns that supplies will be disrupted in Nigeria, the world’s fourth-largest producer.
The euro appreciated 0.1 percent versus the yen. The dollar weakened at least 0.7 percent versus the Australian dollar, New Zealand dollar and Brazilian real.
Treasury three-year notes were little changed, yielding 0.36 percent, after the U.S. sold $32 billion of the securities in the first of three auctions of notes and bonds this week totaling $66 billion.
Among European bonds, Spanish 10-year yields retreated eight basis points to 5.49 percent and rates on 10-year Italian notes lost four basis points to 7.12 percent. German 10-year yields rouse four basis points to 1.88 percent.
The yield on the Dutch 10-year bond rose three basis points to 2.25 percent. The Netherlands sold 3.105 billion euros of 0.75 percent debt due April 2015 at an average yield of 0.853 percent in an auction today.
Austrian (GAGB10YR) 10-year yields declined seven basis points as the government issued 1.32 billion euros of securities maturing in September 2016 and April 2022, with the average yield on the 2022 debt at 3.322 percent, down from 3.528 percent in July.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net
