The S&P 500 increased 0.3 percent to 1,376.51 at 4 p.m. in New York, its highest close since May 3. Ten-year Treasury yields rose one basis point to 1.50 percent. The Dollar Index, a gauge of the currency against six major peers, lost 0.2 percent after gaining as much as 0.1 percent. Oil rallied 3.1 percent to a two-month high of $92.66 a barrel. Soybeans reached a record and wheat climbed to the highest since 2008 as the worst U.S. drought since 1956 scorched fields.
Equities started the session higher following better-than- forecast earnings at companies from International Business Machines Corp. (IBM) to EBay Inc. Stocks briefly turned lower as reports showed existing home sales unexpectedly declined, the Conference Board’s gauge of leading economic indicators fell more than forecast and the Federal Reserve Bank of Philadelphia said its manufacturing gauge shrank for a third straight month. The rally resumed amid speculation the reports will boost chances of more quantitative easing from the Fed.
“The tug-of-war continues,” said Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama. “Earnings reports have been positive, but weakening economic data has tempered investor enthusiasm,” he said. “Always waiting in the background is the increasing possibility of another round of QE.”
Stocks have rallied for three straight days after Fed Chairman Ben S. Bernanke outlined to the Senate Banking Committee various options to ease policy further, including more purchases of Treasuries and mortgage-backed securities and altering the Fed’s language on the outlook for interest rates.
Earnings Season
Earnings have exceeded analyst forecasts at about 71 percent of the 102 companies in the S&P 500 that reported results this month, according to data compiled by Bloomberg. Profits are down 0.7 percent for the group and projected by analysts to have decreased 2.1 percent for the entire index in the second quarter, which would mark the first year-over-year decrease since 2009.
Indexes of technology and consumer-discretionary companies rose more than 1 percent to lead gains among the 10 main industries in the S&P 500 (SPX) today.
IBM Jumps
IBM jumped 3.8 percent and added 54 points to the Dow Jones Industrial Average. (INDU) At $195.34 a share, IBM is the highest- priced stock in the Dow and accounts for 11.4 percent of the price-weighted average. The company’s decade-long shift to higher-margin software sales helped IBM overcome a slowdown in technology spending last quarter and boost its full-year earnings forecast.
EBay surged 8.6 percent to $43.95, the highest price since 2006, after sales and profit topped estimates as more U.S. consumers shopped for new items on the site.
The S&P 500 has rallied almost 8 percent from a five-month low on June 1, bringing it about 3 percent away from a four-year high reached in April. The rebound came after the index tumbled 9.9 percent from April 2 through June 1, approaching a so-called correction of 10 percent.
The Stoxx Europe 600 Index (SXXP) advanced 1.1 percent to the highest level since April 3 as Electrolux AB and Akzo Nobel NV (AKZA) climbed more than 6 percent after earnings topped estimates.
European Stocks
Sandvik AB (SAND), the world’s biggest maker of metal-cutting tools, rallied 6.1 percent in Stockholm after reporting second- quarter profit that beat estimates on manufacturing demand in North and South America. Remy Cointreau SA surged 6.2 percent to a record as France’s second-largest distiller had first-quarter revenue growth that exceeded projections.
Oil advanced to a two-month high on rising concern that the Middle East will lose stability and speculation governments will act to spur economic growth. Israeli Prime Minister Benjamin Netanyahu threatened a forceful response against Iran, which he blamed for a suicide attack in Bulgaria that killed Israeli tourists, and as Syrian government forces battled rebels in Damascus. China has “relatively large” room to boost fiscal spending to support economic growth, a government researcher said.
Soybean futures for November delivery on the Chicago Board of Trade rallied 2.4 percent to $16.5825 a bushel and reached as high as $16.7375. Wheat jumped as much as 3.9 percent to $9.38 a bushel, the most since August 2008, while corn retreated from near a record.
Drought Worsens
More than half of the contiguous U.S. states were in moderate to extreme drought at the end of June, the highest percentage since December 1956, according to the National Climatic Data Center.
United Nations Certified Emission Reduction offsets for December dropped as much as 5.1 percent to a record 2.82 euros a metric ton on the ICE Futures Europe exchange in London as European Union officials struggle to cope with an oversupply of carbon permits.
Spain’s 10-year bond yield rose five basis points to 7.01 percent, increasing for a sixth straight day. The nation sold bonds due in 2014 at an average yield of 5.204 percent, compared with 4.335 percent when they were last sold on June 7. It sold five-year notes at 6.459 percent, compared with 6.072 percent on June 21 and seven-year securities at an average yield of 6.701 percent.
Spanish Debt
Demand for the two-year debt was 1.9 times the amount sold, compared with 4.26 last month and the bid-to-cover for the 2017 securities was 2.06, compared with 3.44 in June, the Bank of Spain said.
Rates on Austrian, Belgian and French debt touched record lows amid demand for sovereign debt considered to be safe.
The MSCI Emerging Markets Index (MXEF) of equities in developing nations climbed 1.2 percent to post its biggest gain in a week and reach its highest level since July 6. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong jumped 2.4 percent, the most this month. China’s Premier Wen Jiabao will probably decide to reduce banks’ reserve requirements and encourage corporate lending as the cabinet meets to discuss efforts to revive economic growth, the swap market indicates. Benchmark indexes in South Korea and Taiwan gained more than 1.4 percent. Russia’s Micex Index jumped 0.6 percent as oil gained. The ruble strengthened 1.1 percent against the dollar.
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