Dollar weakens as U.S. stocks fluctuate while commodities rally

Equity Volatility

Indexes that measure expected volatility in equities are diverging by the most in a year compared with Treasuries, according to data compiled by Bloomberg. Bank of America Merrill Lynch’s MOVE Index, which tracks option projections for swings in U.S. government debt, climbed 62% to 79.99 in May. That’s three times the monthly increase for the Chicago Board Options Exchange Volatility Index of S&P 500 contracts, the data show.

Consumer staples, energy and utility companies led gains among the 10 main groups in the S&P 500 today.

Merck & Co. and Bristol-Myers Squibb Co. jumped at least 4% as the companies’ new experimental drugs showed promise. Intel Corp. surged more than 3.2% after FBR Capital Markets upgraded the chipmaker’s shares. Bank of America Corp. and JPMorgan Chase & Co. dropped at least 1.3% as financial companies retreated the most among 10 groups. F5 Networks Inc. slid 6.6% after Morgan Stanley cut its rating on the maker of data-management equipment.

The S&P 500 sank 1.1% last week, paring its 2013 advance to 14%. The index is down about 2.5% from a closing record on May 21 as investors debate what the Fed’s next move will be.

‘Healthy’ Pullback

“We view the pullback as healthy within the framework of the long-term uptrend,” Katie Stockton, chief market technician at Stamford, Connecticut-based MKM Partners, wrote in note yesterday. “Our intermediate- and long-term momentum indicators remain supportive of the uptrend. Initial support is near 1,600, and our long-term target remains 1,780.”

The S&P 500 has risen for seven straight months which, combined with its strong start to the year, may indicate further gains for stocks in June, according to Sam Stovall, S&P’s New York-based chief equity strategist.

A seven-month winning streak has happened 13 times since 1945 and it has led to advances of 0.4% on average in the eighth month as stock prices rose 62% of the time, Stovall wrote in a note today. The S&P 500’s advances in January and February may also help as the benchmark U.S. equity index has returned annual gains in each of the 26 years with such a positive start since World War II. The strong starts to the year have been followed by increases of 1% in June compared with its normal flat performance.

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