Most U.S. stocks gained, rebounding from a five-day slump, as investors weighed prospects for a last-minute budget deal to avoid tax increases and spending cuts scheduled to start tomorrow. Treasuries fell and natural gas led commodities lower.
The Standard & Poor’s 500 Index rose 0.3 percent to 1,406.14 at 12:13 p.m. in New York after losing as much as 0.3 percent earlier. More than two stocks gained for each that fell in the U.S. The Stoxx Europe 600 Index climbed 0.3 percent. Ten- year Treasury yields were up three basis point at 1.73 percent, still headed for the lowest-ever year-end close. The Japanese yen weakened, set for the biggest annual drop versus the dollar in seven years. Gold was poised for a 12th annual gain.
Senate Majority Leader Harry Reid said negotiators could reach an agreement today that would protect all but top earners from a tax increase at midnight. There is still no agreement and gaps between the two parties remain. Republicans and Democrats were narrowing the annual income level at which tax rates would increase in 2013 to between $400,000 and $500,000.
“The market is in this manic-depressive mood because of what’s going on in D.C.,” Wasif Latif, vice president of equity investments at USAA Investments in San Antonio, said by telephone. The firm oversees $54 billion. “The different ideas that they keep bouncing around and is there a deal or no deal -- it’s like a game show.”
Even if a deal is reached and can get through both chambers of Congress, it would be more limited than President Barack Obama and leaders of both parties sought. It would set up another battle early in 2013 over the budget and the federal debt limit. Reid, a Nevada Democrat, yesterday rejected the latest Republican offer to resolve the deadlock as Minority Leader Mitch McConnell appealed to Vice President Joe Biden in an effort to break the impasse.
The S&P 500 is poised for a 12 percent gain this year while headed for a 0.7 percent drop in December. Financial shares jumped 25 percent this year while consumer, health-care and technology companies added at least 12 percent for the biggest gains among the main industries in the benchmark index. Utilities are down 4.7 percent for the only decline among the 10 groups.
Volume in S&P 500 stocks was 25 percent below the 30-day average at this time of the session, according to data compiled by Bloomberg, as trading slowed before the New Year’s holiday. Trading of U.S. Treasuries will stop at 2 p.m. New York time today and all markets will be shut worldwide tomorrow.
Technology, commodity and consumer companies had the biggest gains among the 10 main groups in the S&P 500 today, while utility and consumer-staples shares fell the most.
Caterpillar Inc., Hewlett-Packard Co. and General Electric Co. rose more than 1 percent for the biggest gains in the Dow Jones Industrial Average. Facebook Inc. climbed 2 percent after Bank of Montreal raised its rating on the shares.
Europe’s benchmark Stoxx 600 capped a 14 percent gain for the year, the biggest annual rally since 2009. ACEA SpA slipped 2.4 percent after saying it will sell its photovoltaic plants to RTR Rete Rinnovabile Srl. Bankia SA slid 3.2 percent. Viscofan SA climbed 6.8 percent for the biggest gain in the regional index.
The S&P GSCI gauge of 24 commodities drifted between gains and losses today, and was little changed for the year. Natural gas lost 3 percent to lead declines today. Hedge funds cut bets on U.S. natural gas to the lowest level since April as forecasts for warmer-than-normal weather in mid-January raised speculation that heating demand won’t be enough to erode a stockpile glut.
Money managers reduced net-long positions, or wagers on rising prices, by 13 percent in the week ended Dec. 24, according to the Commodity Futures Trading Commission’s Dec. 28 Commitments of Traders report. It was the least since the week ended April 24. Gas has tumbled 14 percent from a one-year high on Nov. 23.
Zinc, copper, oil and aluminum increased at least 0.5 percent on signs of firming growth in China. Crude oil added 47 cents to $91.27 a barrel. Prices are down 7.7 percent this year.
China’s manufacturing expanded at the fastest pace since May 2011 in December. The final reading of a Chinese purchasing managers’ index by HSBC Holdings Plc and Markit Economics rose to 51.5, compared with 50.9 for a preliminary reading and 50.5 in November. A level above 50 signals expansion.
Gold for immediate delivery advanced as much as 0.8 percent to $1,669.05 an ounce as the budget impasse boosted demand for haven assets. Prices have gained 6.4 percent this year for a 12th straight gain as central banks from Europe and the U.S. to China pledged additional stimulus to spur economic growth.
The New Zealand dollar strengthened against all 16 major counterparts, rising 0.8 percent to 82.63 U.S. cents. South Korea’s won appreciated to its strongest level in 16 months versus the dollar.
The yen weakened 0.8 percent to 86.55 per dollar, trading at a more-than two-year low. The Japanese currency has declined 11 percent versus the dollar this year, set for the biggest annual slump since 2005, amid speculation the Bank of Japan will increase cash provisions to stoke inflation.
The Shanghai Composite Index of stocks rose 1.6 percent to a six-month high. Hong Kong’s Hang Seng Index closed less than 0.1 percent lower. Australia’s S&P/ASX 200 Index lost 0.5 percent, capping a 15 percent gain this year that’s the biggest since 2009.
The MSCI Asia Pacific excluding Japan Index gained 0.2 percent, headed for a 20 percent increase this year. Japan’s Nikkei 225 Stock Average rose 0.7 percent, bringing its annual advance to 23 percent, the biggest since 2005.