U.S. shares rallied for a second day following the biggest jump since January and gold plunged to a three-month low as lawmakers discussed a potential agreement to extend the nation’s borrowing authority. Treasuries climbed while the yen weakened and oil slid.
The Standard & Poor’s 500 Index added 0.6% to 1,701.83 at 2:33 p.m. in New York after jumping 2.2% yesterday. The Stoxx 600 Europe Index gained 0.4% and the benchmark index for emerging markets extended its two-day gain to 1.8%. U.S. 10-year Treasury yields were little changed at 2.68% while the dollar and yen weakened against major peers. Corn slid to a three-year low on concern demand may shrink if the government scales back the biofuel mandate. Gold futures fell 2.4% to $1,265.40 an ounce, while oil lost 1.2% on forecasts for rising North American production.
The S&P 500 erased losses since the start of the partial government shutdown began on Oct. 1 and is up 0.7% for the week. U.S. Democrats and Republicans were moving toward an agreement to extend the nation’s borrowing authority before an Oct. 17 deadline even as they remained at odds over terms for ending a partial government shutdown. JPMorgan Chase & Co. and Wells Fargo & Co. started the earnings season for banks. Confidence among American consumers fell to a nine-month low in October amid the partial government shutdown and debt-ceiling debate.
“We continue to look at the overall situation in Washington and see how that’s evolving,” Cam Albright, director of asset allocation at Wilmington Trust Investment Advisors said in a phone interview from Wilmington. His firm oversees about $20 billion. “I suspect we may still be at least several days away from getting any sort of final resolution and it may create some market volatility as we go forward.”
The S&P 500 jumped 2.2% yesterday, the most in nine months, as lawmakers moved closer to a debt-ceiling deal.
The Thomson Reuters/University of Michigan preliminary consumer sentiment index of decreased to 75.2 this month from 77.5 in September. Economists in a Bloomberg survey projected a drop to 75.3, according to the median estimate.
JPMorgan was little changed after reporting its first quarterly loss under Chief Executive Jamie Dimon amid a $7.2 billion charge to cover the cost of litigation and regulatory probes. Earnings adjusted for one-time items were $1.42 a share, compared a $1.30 average of 20 analysts surveyed by Bloomberg. Wells Fargo & Co. lost 0.4% after its earnings results showed weakness in new mortgage lending.
With few economic reports available during the shutdown, investors are watching third-quarter corporate earnings. Profits for companies in the S&P 500 probably increased 1.4% during the three months while sales rose 2%, according to analysts’ estimates compiled by Bloomberg.
House Republicans offered a plan to raise the U.S. debt limit and end a partial government shutdown that would require the president to accept policy conditions attached to a spending measure, said two congressional aides.
Republicans sent a list of policy options to the White House following a meeting yesterday, said the aides, who spoke on condition of anonymity. President Barack Obama has insisted that he won’t accept conditions for ending the shutdown, which is in its 11th day.
“The debt-ceiling debate will be resolved without major accidents,” Nicola Mai, senior vice president and sovereign credit analyst at Pacific Investment Management Co., the world’s biggest manager of bond mutual funds, said in an interview with Francine Lacqua on Bloomberg Television’s “The Pulse.” “Politicians realize there are significant consequences to this and that’s why last night we saw some opening on the part of Republicans and Democrats in debt negotiations.”
The Stoxx 600 climbed 1.7% yesterday, the biggest jump in more than five weeks. The index rose 0.6% this week.
Royal Mail Group Ltd., the U.K.’s 360-year-old postal service, jumped as much as 38% on the first day of trading after its initial public offering. Swedish Match AB sank 4.2% as the maker of Longhorn snuff said full-year earnings at its U.S. cigars and chewing tobacco unit will decline.
The MSCI Emerging Markets Index gained 1%, extending this week’s advance to 1.6%. India’s S&P BSE Sensex jumped 1.3% after Infosys Ltd. raised its annual sales forecast. The Shanghai Composite Index added 1.7% as the Shanghai Securities News reported the city may reform state- owned enterprises. Benchmark gauges in Turkey, South Korea and the Philippines advanced at least 0.7%.
The yen declined 0.5% per euro and slipped 0.4% to 98.50 per dollar. Europe’s 17-nation common currency advanced 0.1% to $1.3534 as the U.S. dollar weakened against 12 of 16 major peers.
The rate on $93 billion in Treasury bills due Oct. 24 was at 0.31%, according to Bloomberg Bond Trader data, after climbing as high as 0.52% yesterday. It was zero as recently as Sept. 19. The rate on bills due Nov. 29 was at 0.17%, the highest since the security was issued.
“The fact that it’s far from a done deal and it seems that we’re only talking about a six-week delay means certainly for the bond markets it doesn’t amount to a great deal of relief,” said John Wraith, a fixed-income strategist at Bank of America Corp. in London. “You’ve seen a small decline in the distress in late October Treasury bills but it has just spilled over into those maturing in November and December.”
Credit-default swaps on U.S. Treasuries retreated for a second day from a seven-month high yesterday. The contracts declined 1.5 basis points to 33.5 basis points, according to data compiled by Bloomberg. That compares with 21 basis points last month and 65 basis points in 2011, the last time Congress played brinkmanship over the nation’s debt limit.
Swaps on Treasuries were the ninth most traded of 1,000 entities tracked by the Depository Trust & Clearing Corp. in the week through Oct. 4, up from 147th two weeks before, with 87 trades covering a gross $2.3 billion of debt.
There are now 953 contracts covering a net $3.6 billion of Treasuries outstanding, the most in a year and up from a more than two-year low of $3.1 billion on Sept. 20.
Italy’s two-year note slipped six basis points to 1.59% as the nation sold 6 billion euros ($8.1 billion) of securities due between 2016 and 2028 today, its maximum target. Spain’s 10-year yield dropped five basis points to 4.29%. German bunds of similar maturity were little changed, leaving the yield at 1.86%.
Corn fell to the lowest level since August 2010 as the U.S. Environmental Protection Agency is considering scaling back requirements on the use of ethanol next year. Corn is used to make ethanol in the U.S. Corn has already dropped 38% this year on a record U.S. harvest, heading for the biggest annual decline since at least 1960.
West Texas Intermediate crude oil retreated 1.2% to $101.83 a barrel. The International Energy Agency said that oil producers outside OPEC, led by the U.S., Canada and Kazakhstan, will probably bolster supplies next year by the most since the 1970s.
Gold analysts have turned the most bearish in a month on increased confidence that U.S. lawmakers will reach a deal to avoid default and evidence that Asian demand for physical bullion is weakening.
Fifteen analysts surveyed by Bloomberg News expect prices to decline next week, eight are bullish and four neutral, the highest proportion of bears since Sept. 13. Prices rose after the first partial U.S. government shutdown in 17 years began Oct. 1, as investors sought a haven. President Barack Obama didn’t accept or reject House Republicans’ plan to increase the debt limit and end the government shutdown as the two sides entered further talks.