U.S. equity benchmarks extend all-time highs

U.S. equity benchmarks extended all-time highs amid merger activity while Treasuries advanced on weaker-than-estimated retail sales. The euro slid on speculation over stimulus measures.

The S&P 500 added 0.3 percent, climbing above 1,900 for the first time as of 10:34 a.m. in New York. The yield on 10-year Treasuries slid four basis points to 2.63 percent. The euro weakened 0.3 percent to $1.3722 and benchmark German yields dropped four basis points to 1.42 percent. The Stoxx Europe 600 Index increased 0.1 percent. West Texas Intermediate crude (NYMEX:CLM14) jumped 0.5 percent. India’s rupee strengthened and the S&P BSE Sensex extended a record as exit polls signaled the main opposition alliance won national elections. Russia’s ruble climbed 0.7 percent.

American consumers took a respite from going to malls and restaurants as retail sales climbed less than forecast in April after the strongest gain in four years. The euro weakened after German investor confidence fell for a fifth month in May. The Bundesbank is willing to back measures from the European Central Bank next month if staff forecasts show a lower 2016 inflation outlook, the Wall Street Journal reported earlier, citing a person familiar with the matter.

“We’re still in a nascent recovery,” Chad Morganlander, a fund manager at Stifel Nicolaus & Co., which oversees more than $150 billion, said in a phone interview from Florham Park, New Jersey. “We do believe there will continue to be an underlying improvement in economic trends over the course of this year. There are other economic numbers that trump this report -- it’s not a game-changer,” he said of the retail sales report.

U.S. stocks climbed yesterday, with the S&P 500 and Dow Jones Industrial Average closing at records, as Internet and small-cap shares rallied. The Dow Jones Internet Index had its best day since January, as all 41 members advanced.

 

Technology Stocks

The Nasdaq Composite Index also rose the most since January, adding 1.8 percent to trim its loss for the year. While the technology-heavy gauge has recovered 3.8 percent from its April low, it remains 4.8 percent below a 13-year high in March.

U.S. retail sales climbed 0.1 percent last month after after a revised 1.5 percent surge in March that was the biggest since March 2010, Commerce Department figures showed today. The median forecast of 83 economists surveyed by Bloomberg called for a 0.4 percent advance. Consumers were less inclined to ramp up spending last month after March saw a release of pent-up demand caused by harsh winter weather.

 

Retail Earnings

Macy’s Inc., Wal-Mart Stores Inc. and Kohl’s Corp. are among 12 companies in the S&P 500 scheduled to disclose results this week, giving investors insight into how retailers performed during the winter months.

About 76 percent of the 454 S&P 500 companies that have released results this earnings season have beaten estimates for profit, while 53 percent have exceeded revenue projections, data compiled by Bloomberg show.

Equities extended gains today amid merger activity. DirecTV jumped 1.5 percent today after people familiar with the matter said AT&T Inc. has held advanced talks to acquire the company for about $50 billion. Keurig Green Mountain Inc. added 9.9 percent after Coca-Cola Co. boosted its stake in the company.

The euro weakened against 15 of its 16 major counterparts, sliding 0.3 percent versus the dollar.

 

European Stimulus

“The euro is falling on a report that Weidmann is saying he’s ready to cut rates if needed,” said Manuel Oliveri, a currency strategist at Credit Agricole SA’s corporate and investment banking unit in London, referring to Bundesbank chief Jens Weidmann. “There’s a lot of focus on Weidmann because, as the Bundesbank president, he’s on the least dovish side when it comes to the ECB. This is supporting the notion that there’s a quite high probability of the ECB acting next month.”

While Germany’s Bundesbank will focus on the outlook for price stability at the end of the European Central Bank’s forecast horizon, nothing is decided yet, according to two people familiar with the matter.

The ZEW Center for European Economic Research in Mannheim said its index of German investor and analyst expectations, which aims to predict economic developments six months in advance, slid to 33.1 from 43.2 in April. Economists forecast a decline to 40, according to the median of 33 estimates in a Bloomberg News survey.

 

Pfizer Sweetener

AstraZeneca Plc gained 1.3 percent after people familiar with the situation said Pfizer Inc. will sweeten its bid for the U.K. drugmaker for a second time.

EasyJet Plc lost 4.3 percent, falling from a one-month high, after Europe’s second-biggest discount airline reported a pretax loss. Telecom Italia SpA declined 4.2 percent after the nation’s biggest phone company posted quarterly revenue that missed estimates.

Japanese carmakers advanced, with shares of Nissan Motor Co., the nation’s second-biggest producer, up 5.1 percent after the company predicted profit will rise to the highest level since 2008.

The MSCI Emerging Markets Index gained 0.6 percent. The rupee climbed as much as 0.8 percent to 59.5925 per dollar, the strongest on a closing basis since July. The S&P BSE Sensex advanced 1.4 percent.

 

India Elections

Narendra Modi’s Bharatiya Janata Party and its allies will probably win 249 to 340 seats in India’s parliament, according to six exit polls released yesterday, the last day of the election. For a majority, 272 seats are required and final results will be announced May 16.

Russia’s Micex Index climbed 1.2 percent, extending gains to a fifth day. That’s the longest winning streak this year. Stocks and the currency rose on speculation the latest sanctions won’t hurt the economy. The Ukrainian Equities Index slid 3.5 percent and the hryvnia lost 0.6 percent.

European Union foreign ministers at a meeting yesterday froze the assets of two companies after they were expropriated during Crimea’s annexation and added 13 people to a list of individuals facing asset freezes and travel bans for destabilizing Ukraine. Russia called disputed referendums in eastern Ukraine a sign of “deep crisis” as rebels there sought to secede and gas export monopoly OAO Gazprom gave Kiev a deadline to pay or risk being cut off.

 

China Sales

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong fluctuated after China’s factory output and retail sales missed estimates. The Shanghai Composite Index dropped 0.1 percent after its biggest jump in seven weeks yesterday.

The cost of insuring against losses on company debt dropped to the lowest in more than four years, with the Markit iTraxx Europe index of credit-default swaps on 125 companies with investment-grade ratings declining almost one basis point to 65.5 basis points. Contracts on an index of junk-rated bonds approached the lowest since July 2007.

Average yields on investment-grade corporate bonds dropped to an all-time low of 1.7 percent, according to Bank of America Merrill Lynch index data.

 

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