U.S. stocks climbed toward another record and gold advanced while the dollar weakened as corporate earnings topped estimates and signs of slower economic growth fueled bets the Federal Reserve will maintain stimulus.
The Standard & Poor’s 500 Index (CME:SPZ13) rose 0.3% to 1,752.21 at 3:38 p.m. in New York, bringing it three points away from an all-time high. The Stoxx Europe 600 Index gained 0.4%, while Chinese stocks fell as the benchmark money-market rate jumped the most since June. Gold climbed 1.2% while oil reversed an earlier loss. Treasury 10-year note yields traded near a three-month low. The dollar touched a two-year low against the euro.
The U.S. trade deficit was little changed in August as imports and exports stalled, data showed today. U.S. factory output expanded in October at a slower pace than forecast, while another report showed euro-area services and manufacturing grew less than estimated. Chinese manufacturing strengthened this month more than anticipated. Microsoft Corp. and Amazon.com Inc. are among U.S. companies reporting earnings today.
“Earnings will improve,” David James, director of research at Alpha, Ohio-based James Investment Research Inc., said in a phone interview. His firm oversees more than $4.5 billion. “We want to look at the quality of these earnings as far as looking at revenues and making sure there is actual growth and not just manufactured growth.”
About 47 companies in the S&P 500 are scheduled to post results today, the busiest day of the third-quarter reporting season. Of the 212 companies that have released earnings so far, 76% exceeded analysts’ predictions for profit, while 53% beat sales estimates, according to data compiled by Bloomberg.
Earnings for members of the gauge probably increased 2.5% in the third quarter as sales climbed 2.2%, according to analysts’ estimates compiled by Bloomberg.
Homebuilders rallied 3.4% as a group today as PulteGroup Inc.’s profit surged. Ford Motor Co. gained 1.4% after earnings beat projections. McKesson Corp. jumped 4.5% after boosting its annual forecast and agreeing to buy Germany’s Celesio AG for about 3.9 billion euros ($5.4 billion). Symantec Corp. sank 13% as the maker of security software forecast sales and profit that fell short of analysts’ estimates.
The Bloomberg U.S. Airlines Index climbed 2.7%, heading for the highest closing level since 2007. Southwest Airlines Co. added 3.3% after earnings and operating revenue met forecasts. United Continental Holdings Inc. increased 1.4% after the world’s largest airline promised unspecified “numerous actions” to boost revenue and efficiency as third-quarter profit trailed analysts’ estimates.
Better-than-expected earnings and monetary stimulus from the Fed have driven the S&P 500 up 23% this year. The 16-day partial government shutdown weighed on fourth- quarter growth and will prompt Fed policy makers to wait until March before starting to scale back the $85 billion of monthly bond purchases, a Bloomberg survey showed last week.
The S&P 500 rallied to a record on Oct. 22 after payrolls in the U.S. climbed by less than forecast in September, adding to speculation the Fed will delay curtailing its monetary stimulus. Policy makers are scheduled to meet Oct. 29-30, when they will evaluate the strength of the recovery with a less complete set of figures than usual due to the suspension of reports and collection of data during the government closure.
The Commerce Department today reported the trade deficit in the U.S. was little changed. More Americans than forecast filed applications for unemployment benefits last week as California continued to work through a backlog. The Markit Economics preliminary index of U.S. manufacturing decreased to 51.1 in October from a final reading of 52.8 at the end of the previous month, the London-based group said today.
A preliminary gauge of Chinese manufacturing strengthened to 50.9, compared with a projected 50.4 reading, according to data from HSBC Holdings Plc and Markit Economics and a Bloomberg survey.
The Stoxx Europe 600 Index rose for the 10th time in 11 days. Daimler AG, the maker of Mercedes-Benz cars, and ABB Ltd., the world’s largest maker of power transformers, climbed more than 3.3% after profit beat projections. Celesio jumped 5.4% after McKesson agreed to buy the German drug wholesaler.
Credit Suisse Group AG lost 2.8% after the second- biggest Swiss bank posted profit that missed analysts’ estimates. Husqvarna AB tumbled 13% in Stockholm, its steepest drop ever, as the biggest maker of powered garden tools reported profit that trailed projections.
The MSCI Emerging Markets Index fell for a second day, losing 0.3%. The Shanghai Composite Index dropped 0.9% and the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong slid 1.3%. The seven-day repurchase rate, a gauge of funding availability in the banking system, surged 65 basis points to 4.67%. The won weakened from a two-year high versus the dollar.
The yield on 10-year Treasury notes added one basis point to 2.51%. It touched 2.47% yesterday, the lowest since July 22.
Italy’s 10-year yield climbed four basis points to 4.15% as a report showed consumer confidence fell for the first time in five months.
The euro gained 0.2% to $1.3801 after climbing to as high as $1.3822, the strongest level since November 2011. The 17-nation currency rose 0.1% versus the yen. The dollar dropped 0.1% to 97.29 yen.
Norway’s krone advanced against all of its 16 major peers, rising 0.3% to 8.1340 per euro after the central bank left its benchmark interest rate unchanged and said the currency had depreciated since its last meeting.
The shekel declined 0.1% to 3.5230 per dollar after Finance Minister Yair Lapid said the currency is “too strong” and that he’ll work with designated Bank of Israel Governor Karnit Flug to weaken it.
Gold futures rose to $1,350.30 an ounce, a three-week high, on speculation that the Fed will maintain the pace of monetary stimulus to boost economic growth. The precious metal dropped 20% this year through yesterday, heading for the first annual decline since 2000.
West Texas Intermediate crude rose 0.3% to $97.11 a barrel, climbing from a four-month low. Futures earlier fell as much as 0.9% a day after Energy Information Administration data showed that U.S. crude output increased to the highest level in 24 years. Stockpiles climbed 6.8% to 379.8 million barrels in the five weeks ended Oct. 18, according to the EIA.