US Stocks Rise Amid Earnings as European Bonds Gain on Bailout

Monday, 04 Aug 2014 04:58 PM

 

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The Standard & Poor’s 500 Index rebounded from the worst week since 2012, as Berkshire Hathaway Inc. topped earnings estimates and investors weighed geopolitical developments.

The S&P 500 jumped 0.7 percent at 4 p.m. in New York for its biggest gain since July 18. Anadarko Petroleum Corp. and Noble Energy Inc. increased more than 4.8 percent to lead a rally among energy companies. Portuguese 10-year yields slid eight basis points to 3.62 percent. The euro traded at almost its lowest level versus the dollar since November. Commodities rebounded after a four-day decline as copper futures rose the most in a week.

About $1.2 trillion was wiped from the value of global equities last week amid concern that a default by Argentina and the crisis at Espirito Santo would constrict credit markets as the Federal Reserve debates the timeline for interest-rate increases.

Ukraine’s defense minister said Monday he’s confident victory over pro-Russian separatists is close. Israel’s military said it was on course to destroy within hours all known tunnels dug by Hamas guerrillas in the Gaza Strip. Warren Buffett’s Berkshire Hathaway Inc. rose 3.1 percent to an all-time high, after earnings topped estimates.

“We’re seeing a reprieve of geopolitical concerns, which is modestly emboldening risk-taking for today,” Chad Morganlander, a money manager at St. Louis-based Stifel, Nicolaus & Co., which oversees about $160 billion, said. “The economy overall is moving forward with better-than-expected earnings, and we see an upward bias continuing over the next couple of months.”

Fed, Earnings

The S&P 500 has fallen 2.5 percent from an all-time high on July 24. It sank 2.7 percent last week, the most since June 2012 as companies around the globe including Exxon Mobil Corp. posted disappointing results, Argentina defaulted and Espirito Santo was ordered to raise capital.

Treasury 10-year note yields were little changed at 2.49 percent today. The difference between yields on Treasury five- year notes and 30-year bonds reached the widest in two weeks as investors questioned how quickly the Fed will raise rates.

Concern has grown that the improving U.S. economy may force the Fed to raise its benchmark rate sooner than expected. Data last week showed U.S. gross domestic product expanded at a 4 percent annual pace in the second quarter, while a separate report indicated employers in the U.S. added more than 200,000 jobs for a sixth straight month in July.

Berkshire, Kors

Among stocks moving today, energy companies soared 1.6 percent after Colorado Gov. John Hickenlooper said at a news conference that he wants anti-fracking initiatives removed from a voting ballot. The energy gauge rebounded after falling 4.1 percent last week, the biggest five-day drop since June 2012.

Berkshire Hathaway Class B shares advanced as a rebounding U.S. economy boosted the value of the company’s stock portfolio and helped propel growth at the dozens of companies it owns. Michael Kors Holdings Inc. slid 5.9 percent, the most in the S&P 500, after the company said profitability will decline this year.

Some 72 companies including Walt Disney Co. and Time Warner Inc. report earnings this week. Of the companies that have posted results so far this season, 76 percent beat earnings estimates and 65 percent exceeded sales projections, according to Bloomberg data.

Europe Bonds

Spanish and Italian government bonds rallied with Portuguese debt after the Bank of Portugal on Sunday unveiled a 4.9 billion-euro ($6.6 billion) bailout that will leave Espirito Santo shareholders and junior bondholders with losses, while sparing senior creditors and unsecured depositors.

Spain’s 10-year yield fell six basis points to 2.50 percent, approaching the record-low 2.45 percent set on July 30. The rate on similar-maturity Italian debt dropped six basis points to 2.70 percent.

© Copyright 2014 Bloomberg News. All rights reserved.

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