SF: Treasuries Rise, Stocks Fluctuate as Fed Meets; Cotton Advances
Nov. 3 (Bloomberg) -- Treasuries rose, driving the 30-year yield to a one-week low, and stocks fluctuated as the Federal Reserve discusses stimulus plans and U.S. elections resulted in divided control of Congress. Irish bonds slid on concern investors will be forced to share bank losses on bad debt.
The yield on the 30-year U.S. note fell five basis points to 3.87 percent at 11:07 a.m. in New York. The Standard & Poor's 500 Index slipped 0.2 percent to 1,191.48, hovering near its highest close since May 3. The dollar strengthened for a third day against the yen. Cotton rallied to an all-time high. Ten- year Irish bond yields increased 17 basis points to a record 500 basis points more than benchmark German bunds.
The Fed will probably restart buying bonds to fuel economic growth, pledging to purchase $500 billion or more in securities, 29 of 56 economists in a Bloomberg survey said. Republicans gained at least 60 House seats yesterday, capitalizing on concern about government spending and delivering a rebuke to President Barack Obama's domestic agenda, while Democrats retained control of the Senate.
"Investors are in a wait-and-see mode," said David Kelly, who helps oversee $445 billion as chief market strategist for JPMorgan Funds in New York. "The market does best with a divided government because that brings down uncertainty. However, the outcome of the election had already been anticipated. On top of that, people are not willing to make a big call ahead of the Fed announcement."
Treasuries
The yield on the 10-year Treasury note declined five basis points to 2.53 percent. The government said it plans to auction $32 billion of three-year notes, $24 billion of 10-year securities and $16 billion of 30-year bonds next week.
Hartford Financial Services Group Inc. climbed 7.3 percent after lifting its earnings estimate this year. BlackRock Inc. slumped 2.8 percent after saying that Bank of America Corp. and PNC Financial Services Group Inc., two of its biggest shareholders, plan to sell stock. EOG Resources Inc. tumbled 11 percent after an analyst said the company cut production-growth estimates.
The S&P 500 has rallied to a six-month high this week and surged 17 percent since July 2 as speculation increased that Republicans would take control of the U.S. House and the Fed will pump more money into the economy.
U.S. equities held gains after reports on service industries and jobs growth topped economists' estimates.
The Institute for Supply Management's index of non- manufacturing businesses, which covers about 90 percent of the economy, rose to 54.3 in October from 53.2 a month earlier, the group said today. The median forecast of 76 economists surveyed by Bloomberg News projected the ISM index would rise to 53.5. Estimates ranged from 52 to 55.2.
ADP Report
Companies in the U.S. boosted payrolls by more than forecast in October, data from a private report showed today. Employment increased by 43,000, according to figures from ADP Employer Services. The median estimate of 38 economists surveyed by Bloomberg News called for a 20,000 gain. The government jobs report in two days is forecast to show the unemployment rate held steady at 9.6 percent in October as the economy added 60,000 jobs.
Almost 78 percent of companies in the S&P 500 that have reported earnings since Oct. 7 have topped analysts' estimates for per-share profit, according to data compiled by Bloomberg.
European Stocks
The Stoxx Europe 600 erased its advance, pulling back from the longest stretch of gains since July. Coloplast A/S, the world's largest maker of ostomy and urology products, jumped 11 percent after profit topped forecasts. Societe Generale SA, France's second-biggest bank, rallied 3.3 percent as earnings more than doubled. Statoil ASA fell 6.8 percent after cutting its output target. Anheuser-Busch InBev NV lost 2.8 percent as profit missed estimates.
Irish 10-year bonds dropped for the seventh straight day, sending the yield up 12 basis points to 7.41 percent on concern that the government will have to pump more money into Allied Irish Banks Plc, whose subordinated-debt swaps signal a 60 percent probability of default within the next five years. The cost of insuring Irish sovereign debt against default surged to a record, with credit-default swaps rising 15.5 basis points to 533.5, according to CMA, a data provider.
The difference in yield, or spread, between Portuguese 10- year notes and German bunds, Europe's benchmark government debt securities, widened nine basis points to 386 basis points. The Greek-German spread increased eight basis points to 840 basis points.
Euro's Stability
German Finance Minister Wolfgang Schaeuble said the euro's stability depends on making investors pay for future debt crises, brushing aside warnings that Germany's demands are hurting Europe's most-indebted countries.
The MSCI Emerging Markets Index gained for a fifth day, adding 0.8 percent. The Hang Seng China Enterprises Index of Hong Kong-traded shares advanced 2.2 percent, the biggest rally among equity indexes worldwide, after Goldman Sachs Group Inc. said the city's shares have the most to gain from extra liquidity released by stimulus measures and China's economic growth. South Korea's Kospi Index rose 0.9 percent to the highest level since December 2007 as Deutsche Bank increased its outlook for the nation's shares.
--With assistance from Claudia Carpenter, Mark Gilbert, David Merritt, Michael Patterson, Michael Shanahan and Daniel Tilles in London. Editor: Michael P. Regan, Stephanie Borise
