Stocks climbed, with the Standard & Poor’s 500 Index returning above its record closing level, after U.S. home sales increased and investors speculated central banks will continue to stimulate the economy. The euro rose with Italian bonds as the country forms a government
The S&P 500 rose 0.8% to 1,594.12 as of 1:07 p.m. New York time, while the Stoxx Europe 600 Index climbed 0.5%. The euro strengthened 0.5% against the dollar and yields on Italian 10-year bonds fell 15 basis points to 3.91%. The Markit iTraxx Europe index of investment-grade company credit risk lost 4.8 basis points for a seventh straight decline, the longest streak since 2009. Corn, natural gas and wheat jumped more than 3% to lead commodity gains.
European Central Bank policy makers may cut interest rates this week, according to the majority of economists in a Bloomberg survey, while the Federal Reserve will consider renewing its commitment to bond-buying at a two-day meeting starting tomorrow. A gauge of U.S. homebuilder shares rallied for a seventh straight day after a report showed signs of further progress in the housing market.
“There’s just a positive tone to the market in part because recent lackluster economic trends have reinforced investors’ belief that the Federal Reserve will continue to press on the gas pedal,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $130 billion, said by telephone. “It’s just further evidence that this rally has been a highly caffeinated rally courtesy of global central banks, and their quantitative easing plans will continue.”
The S&P 500 climbed 1.7% last week and is poised for a sixth straight monthly gain, its longest rally since 2009. Technology, commodity and utility companies led gains in all 10 of the main industries in the S&P 500 today. Hewlett-Packard Co., Microsoft Corp. and International Business Machines Corp. climbed more than 2% for the biggest gains in the Dow Jones Industrial Average.
Tenet Healthcare Corp. surged 7% as hospitals will get a pay raise from the U.S. government for treating patients in the nation’s Medicare program. Moody’s Investors Service Inc. and McGraw-Hill Cos. advanced after a group of investors agreed to drop their claims against the companies. Actavis Inc. and Valeant Pharmaceuticals International Inc. rose more than 3.5% as people familiar with the situation said the companies are in merger talks that have stalled.
U.S. technology stocks, the second-best performing industry of the past decade, have fallen to the cheapest levels in at least seven years and are vulnerable to more losses as analysts reduce second-quarter profit estimates.
Earnings at computer companies will fall 5.5% in the three months through June as consumers and government agencies cut spending, according to more than 2,000 analyst estimates tracked by Bloomberg. The group, led by Apple Inc. and International Business Machines Corp., trades at 13 times projected profit, the lowest level compared with the S&P 500 since Bloomberg began compiling the data in 2006.
Standard Pacific Corp., D.R. Horton Inc. and Toll Brothers Inc. paced a rally in homebuilders. The index of pending home sales increased 1.5% after a revised 1% decline the prior month that was larger than initially reported, figures from the National Association of Realtors showed. Economists forecast a 1% increase, according to the median estimate in a Bloomberg survey.
U.S. consumer spending rose more than projected in March, reflecting a jump in outlays for services that is unlikely to be repeated. Household purchases, which account for about 70% of the economy, climbed 0.2% after a 0.7% gain the prior month, a Commerce Department report showed. The median estimate in a Bloomberg survey of 74 economists called for spending to be little changed. Incomes increased less than forecast and inflation cooled to the lowest level in more than three years.
The Stoxx 600 pared its gain after a report showed economic confidence in the euro area decreased more than economists forecast in April. The regional benchmark index rose 3.7% last week, taking its advance for April to 0.7%. That would be its 11th straight monthly increase, the longest since 1997. The MSCI All-Country World Index rose 0.7% today. Japanese and Chinese equity markets closed for holidays.
Aberdeen Asset Management Plc jumped 8% after increasing its dividend. Swedish Match AB gained 6.7% after posting first-quarter profit that beat estimates. Balfour Beatty Plc tumbled as much as 15% as the U.K.’s largest construction company said 2013 operating profit will be less than it had projected earlier.
The euro strengthened 0.4% to $1.3085 as it rose against 12 of 16 major peers.
The Frankfurt-based ECB will lower its benchmark rate to a record 0.5% when central bankers meet in Bratislava May 2, according to the median of 69 economist estimates compiled by Bloomberg.
Spain’s 10-year bond yield fell 12 basis points to 4.16%, the lowest since October 2010. Germany’s 10-year bund yield was little changed at 1.20% and the rate on 10-year U.S. Treasury notes was little changed at 1.66%.
Italian Prime Minister Enrico Letta may finish installing a government today nine weeks after voters rejected the country’s budget-cutting course. Italy sold 6 billion euros ($7.9 billion) of five- and 10-year bonds at the lowest yield since 2010. Italy sold the 2018 notes at an average yield of 2.84%, and 3 billion euros of 2023 bonds to yield 3.94%.
“We’ve seen the impact of Italy on the bond yields and it’s having a relief effect on the euro too,” said Jane Foley, senior currency strategist at Rabobank International in London. “Given the huge amount of obstacles this government has got to get over I think that the relief that we are seeing has been amplified because the market is very short euros.”
The new Italian government pledges to dismantle parts of the budget-cutting project undertaken by ousted premier Mario Monti. German Finance Minister Wolfgang Schaeuble will travel to Spain today to unveil a plan aimed at spurring investment in Spanish companies.
At a time when politicians are squeezing budgets to cut borrowing, the bond market is clamoring for more debt, pushing yields on almost $20 trillion of government securities to less than 1%.
The average yield to maturity for the Bank of America Merrill Lynch Global Broad Market Sovereign Plus Index fell to a record low 1.34% last week from 3.28% five years ago. Even though the amount of bonds in the index has more than doubled to $23 trillion -- bigger than the gross domestic product of the U.S. and China combined -- countries from Germany to Rwanda sold debt in the past month at their lowest yields.
The S&P GSCI Index rallied 1% as 16 of its 24 commodities advanced. Gold climbed 0.4% to $1,467.67 an ounce, paring its monthly decline to 8.2%. West Texas Intermediate crude added 1.2% to $94.12 a barrel.
The yen weakened against 14 of 16 major peers and traded little changed versus the U.S. dollar after climbing 0.7% earlier. The dollar weakened against all 16 major counterparts except the yen. New Zealand’s dollar strengthened against all but one of its 16 major peers, climbing 0.9% to 85.59 U.S. cents.
Most emerging-market stocks rose. The MSCI Emerging Markets Index added 0.4%, helped by the Sensex in India, which climbed 0.5%. The FTSE/JSE Africa All Share Index dropped 0.2%.
The Hang Seng China Enterprises Index in Hong Kong fell 0.5%, declining for the first time in four days, as slower growth in Chinese industrial companies’ profits added to signs the world’s No. 2 economy is losing steam.