Treasuries and gold dropped, while U.S. stocks fluctuated on the final day of the market’s biggest September rally since 1939, as improving economic data damped speculation the Federal Reserve will need to buy more debt to safeguard the recovery.
The drop in Treasuries send the yield on the benchmark 10- year up 2 basis points to 2.52 percent. The S&P 500 slipped 0.1 percent to 1,143.88 at 3:06 p.m. in New York, leaving it up about 9.1 percent for the month 11 percent higher for the third quarter. Gold retreated from a record as the dollar rebounded from a five-month low versus the euro.
U.S. government data showed a bigger-than-projected drop in jobless claims and second-quarter economic growth that was faster than previously estimated, while a private report said business activity unexpectedly accelerated in September. The data may be easing pressure on Fed Chairman Ben S. Bernanke to start another round of debt purchases, or quantitative easing, in order to bolster growth.
“Equities and Treasuries have been higher on the notion of quantitative easing,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, which oversees $50 billion in Philadelphia. “Now that it may not happen as soon as investors expected, or at all, it takes at least one form of buying out of the marketplace. It’s helping unwind a little bit of that trade.”
All 10 industry groups in the S&P 500 advanced in September and all 30 stocks in the Dow Jones Industrial Average climbed in the month. Some of the month’s best-performing groups were the biggest drags on the market today.
Technology companies lost 0.3 percent today to trim their September rally to 12 percent, the biggest among 10 groups. Apple Inc. fell 0.9 percent and Caterpillar Inc., the Dow’s best-performing stock this month, dropped 1.9 percent for the biggest retreat in the 30-stock gauge.
Even after September’s rally, the S&P 500’s valuation of 12.5 times projected earnings over the next 12 months compares with a 16.5 average since 1954 using reported results, according to data compiled by Bloomberg.
The extra yield investors demand to hold 10-year Treasury notes over 2-year debt widened to 2.09 percentage points, reflecting less concern the U.S. economic recovery is stalling. The spread was 2.03 percentage points on Sept. 28, the narrowest this month on a closing basis.
The Labor Department said initial jobless claims fell by 16,000 to 453,000 last week, lower than the median forecast of economists surveyed by Bloomberg News. The U.S. economy grew at a 1.7 percent annual rate last quarter, Commerce Department data showed, faster than the 1.6 percent estimated last month. The Institute for Supply Management-Chicago Inc.’s business barometer unexpectedly accelerated.
The dollar strengthened against 10 major counterparts, climbing 0.1 percent to $1.3615 against the euro after reaching to $1.3683 earlier, the weakest since April 12.
Yields on Spanish and Irish bonds fell 8 basis points and 22 basis points respectively amid speculation the nations are containing their debt crises. Ireland’s government is preparing to take majority control of Allied Irish Banks Plc and pump extra cash into Anglo Irish Bank Corp. to draw a line under its financial crisis. Moody’s Investors Service said the outlook for Spain is steady after lowering its credit rating one level.
“Today has been positive in terms of clarifying some of the unknowns in the market,” said Zoso Davies, a credit strategist at Barclays Capital in London. “We have moved past a number of short-term stumbling blocks and some hurdles have been removed. Questions are being answered and that should give the market confidence to take a slightly longer-term view.”
Irish 10-year government bonds yields fell 17 basis points relative to German bunds for a so-called yield spread of 429 basis points, after reaching a record 454 basis points yesterday. The Spanish-German 10-year yield spread narrowed 9 basis points to 186 basis points, while the Portuguese-German spread decreased 17 basis points to 429 points. The 10-year German bund yield rose 4 basis points to 2.28 percent.
European stocks retreated for a fourth day, trimming the benchmark Stoxx Europe 600 Index’s biggest quarterly advance in a year to 6.7 percent.
Allied Irish Banks Plc slid 8.2 percent. Compass Group Plc declined 3.8 percent as the world’s largest catering company’s forecasts missed some analysts’ estimates. Fiat SpA led auto stocks higher after predicting an annual profit.
Asian, Emerging Markets
The MSCI Asia Pacific Index slumped 0.9 percent, the biggest drop in three weeks. Nintendo Co., the world’s largest maker of portable video-game machines, tumbled 9.3 percent after cutting its profit forecast. Industrial & Commercial Bank of China Ltd., the world’s No. 1 lender by market value, slumped 3.2 percent in Hong Kong after Goldman Sachs Group Inc. sold a stake.
The MSCI Emerging Markets Index climbed 0.5 percent, poised to close at the highest level since June 2008. Turkey’s ISE National 100 Index rose to a record after Templeton Asset Management Ltd.’s Mark Mobius said yesterday the firm plans to invest $250 million in Turkish equities “very soon.”
China’s Shanghai Composite Index jumped 1.7 percent, the biggest gain since Aug. 16, after Citigroup Inc. analysts said new government measures to tame real-estate prices have “partially settled” policy uncertainties.
Gold futures slipped 0.1 percent to $1,308.90 an ounce after touching a record $1,317.50. Crude oil for November delivery surged 2.9 percent to $80.13 a barrel on the New York Mercantile Exchange as today’s economic data spurred speculation demand may improve.
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