Stocks rally on confidence, housing data as Treasuries, yen fall

Financial Shares

“Sustained GDP growth and improving employment conditions will help banks protect their now-stronger balance sheets,” Sean Jones, co-author of the report, said in the statement.

Options traders are paying the least in more than two years to hedge against declines in U.S. financial shares, reassured by analysts who say they will report the biggest profit since 2007 this year.

Puts protecting against a 10% decline in the Financial Select Sector SPDR Fund cost 4.12 points more than calls betting on a 10% increase, according to three-month options data compiled by Bloomberg. That’s the lowest since November 2010. Banks and brokerages in the S&P 500 rallied 20% this year

Today’s rally eased concern that last week’s 1.1% slump in the S&P 500 signaled more losses to come. The S&P 500 reached an intraday record of 1,687.18 on May 22 and fell 1.9% through the close. The previous two times the benchmark gauge set an intraday high and dropped more than 1% from that level in the same day, it marked the end of a bull market, according to data compiled by Bloomberg. The 1.4% retreat on Oct. 11, 2007, was followed by a 56% plunge the next 17 months. On March 24, 2000, the S&P 500 reached a record 1,552.87, fell 1.6% that day and then erased 49% through October 2002.

Balanced Funds

Investors are pumping record amounts of money into U.S. balanced funds, whose freedom to buy stocks and bonds made them barometers for gains in the biggest bull markets of the past half century.

Managers led by Capital Research & Management Co. and Invesco Ltd. received $35.2 billion from January to April, the most in any four months, according to data compiled by Bloomberg and the Washington-based Investment Company Institute. Assets in the funds increased 3.6%, compared with 1.2% for those that only buy equities.

Europe Markets

The Stoxx Europe 600 Index advanced for a second day, climbing 1.3%. Societe Generale SA and Barclays Plc advanced more than 2.5%. AstraZeneca Plc increased 2.7% after agreeing to pay $323 million for Omthera Pharmaceuticals Inc., a U.S. drugmaker with an experimental treatment for patients with high levels of triglycerides, which can contribute to heart attacks and strokes. Omthera jumped a record 99%.

Europe’s benchmark equity gauge has rallied 3.9% so far this month and the S&P 500 has risen 3.9% in the period, the most since January.

The MSCI Emerging Markets Index added 0.1%, advancing for a third day, as benchmark gauges in China, Russia, Hungary, Indonesia and Thailand rose at least 1%. Taiwan Semiconductor Manufacturing Co. led declines among exporters, dropping 2.2%, on concern a weaker yen will hurt their competitiveness.

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