U.S. stocks climbed for a second day while the yen weakened as investors awaited clues from the Federal Reserve about its plans for monetary stimulus. U.K. and German government bonds dropped while European equities were little changed. The Swiss franc strengthened.
The Standard & Poor’s 500 Index added 0.8% to 1,652.09 as of 3:15 p.m. in New York. The Japanese currency depreciated 0.8% to 95.23 yen per dollar. Britain’s 10- year gilt yield jumped six basis points to 2.14% while the rate on similar-maturity German debt rose five basis points to 1.57% and U.S. Treasury yields were little changed at 2.17%. Nickel and copper retreated, while oil and natural gas advanced.
The Fed starts a two-day policy meeting today, about a month after Chairman Ben S. Bernanke said quantitative easing could be scaled back if the employment outlook showed sustainable improvement. U.S. housing starts rose and the cost of living increased less than forecast in May, reports showed today. European Central Bank President Mario Draghi said policy makers are considering further non-standard monetary-policy tools.
“Everybody’s just waiting to hear what the Fed has to say,” Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co. in Elmira, New York, said by telephone. “If they say they’ll taper sooner rather than later, there’ll be fear in the market and we’ll see a decline for some time in stocks. We’ll need to see the results of tapering. If the economy continues to roll along and grow without as much Fed buying, that will spur us to the next leg up in the bull market.”
The S&P 500 index advanced 0.8% yesterday, when reports showed U.S. manufacturing and homebuilder confidence rose and a British official said Group of Eight leaders see downside risks to the global economy abating. The index has rallied 16% this year and is up 144% from its bear-market low in 2009 amid the Fed’s bond buying program and four straight years of earnings growth.
An S&P index of 11 homebuilders added 0.7%, rebounding from an earlier 1.6% decline. Commerce Department data showed builders broke ground on 914,000 U.S. homes at an annualized rate, up 6.8% while below the the median estimate of 950,000 from 82 economists surveyed by Bloomberg. Another report showed the consumer price index increased 0.1% in May, half the median forecast, after falling 0.4% in April.
General Electric Co., American Express Co. and UnitedHealth Group Inc. climbed at least 1.9% to lead gains in the Dow Jones Industrial Average. Flir Systems Inc. climbed 6.2% after Raymond James & Associates Inc. lifted its rating to strong buy. Walter Energy Corp. advanced 17% as Morgan Stanley said the coal miner’s shares may triple. Hormel Foods Corp. dropped 4% as the company cut its 2013 profit forecast.
Treasury 10-year note yields were down less than one basis point at 2.18% after climbing five basis points yesterday. The dollar was stronger against 11 of 16 major peers, while losing 0.3% to $1.3405 per dollar.
President Barack Obama said Fed Chairman Bernanke has stayed in his post “longer than he wanted,” one of the clearest signals the central bank chief will leave when his current term expires next year.
“Ben Bernanke’s done an outstanding job,” Obama said in an interview with Charlie Rose that aired yesterday, when asked about nominating him for another term subject to Senate approval. “He’s already stayed a lot longer than he wanted or he was supposed to.”
Investors cut bond holdings to a near two-year low this month and bought stocks as expectations the Fed may remove monetary stimulus bolstered growth forecasts, a Bank of America Corp. survey showed.
A net 50% of 190 global fund managers, who together oversee about $572 billion, said they now hold fewer bonds than are represented in asset-allocation benchmarks, while the proportion who are overweight on stocks rose to 48% from 41% as they bought U.S. and European shares. Emerging- market equity holdings slumped to the lowest level since December 2008.
“Investors’ sentiment has been surprisingly resilient in recent weeks despite the jump in volatility in financial markets,” New York-based Michael Hartnett, chief investment strategist at Bank of America’s Merrill Lynch unit, wrote in a note to investors today. “While our fund-flows data shows bond capitulation, the survey shows that there has been no capitulation in equities in the U.S. and Europe.”
The Stoxx Europe 600 Index closed little changed, with trading volume about 19% below the average over the past 30 days.
Among stocks moving in Europe, Kabel Deutschland Holding AG rose 3.7% to a record as Liberty Global Plc made a preliminary takeover offer for Germany’s largest cable provider, pitting the John Malone-controlled company against Vodafone Group Plc. Danske Bank A/S slid 6.1% after the Financial Supervisory Authority said Denmark’s biggest lender had underestimated its risky assets.
About four stocks gained for every three that fell in the MSCI Emerging Markets Index, which lost 0.4%. Brazil’s Ibovespa added 0.7% after slumping 2.6% in the previous two sessions. The Hang Seng China Enterprises Index slipped 0.1% after official data showing Chinese home prices climbed in almost all cities in May stoked concern the increases will limit the scope for monetary stimulus.
Portugal’s 10-year bond yield dropped 14 basis points to 6.11% after European Union Economic and Monetary Affairs Commissioner Olli Rehn said the EU is looking at possible “precautionary arrangements” that might help the nation exit its aid program.
The yen retreated against all 16 major peers, sliding 1.1% to 127.66 per euro. Australia’s dollar fell 0.6% to 94.86 U.S. cents after the Reserve Bank indicated the currency may weaken further.
The Swiss franc advanced versus 15 of 16 major peers after the lower house of parliament voted against further deliberations of a law allowing banks to cooperate with the U.S., making it less likely the bill will pass.
The JPMorgan Global FX Volatility Index increased to 10.45% from 10.25% yesterday after climbing to a one- year high of 11.43% on June 13.
Nickel, the worst performer this year among the six main industrial metals traded on the London Metal Exchange, retreated 1% to $14,150 a metric ton. The metal declined as much as 1.8% to trade at the lowest price since 2009. Copper for delivery in three months declined for a second day, falling 1.1% to a six-week low of $7,005 a ton.
Natural gas gained 0.5% to $3.894 a million British thermal units after jumping 3.8% yesterday, the biggest increase in seven weeks, on forecasts for hotter weather in late June that may spur demand from power plants. West Texas Intermediate crude added 0.8% to $98.50 a barrel.
Wheat advanced on concern that rain in parts of the U.S., the world’s largest exporter, will further delay harvesting that’s lagged behind last year’s pace. The contract for delivery in September increased 1% to $6.9475 a bushel on the Chicago Board of Trade. Soybeans for November delivery gained 0.3% to $12.8975 a bushel.