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Stocks Climb to Record Highs as Dow Tops 19,000; Oil Falls

Tuesday, 22 Nov 2016 04:28 PM

(Bloomberg) -- All four major U.S. stock benchmarks rallied to records, with the Dow Jones Industrial Average topping 19,000 for the first time. Metals climbed, while oil fell.

The Dow Average joined the S&P 500 Index, the Nasdaq Composite Index and the Russell 2000 Index of smaller companies in hitting their all-time highs. The MSCI All Country World Index extended this month’s advance and emerging-market shares surged. Gold posted its first back-to-back increase since Donald Trump’s election while copper paced gains in metals. Oil fell after an OPEC committee failed to agree on Iranian and Iraqi production levels. European bonds rallied on bets policy makers will extend their stimulus program.

Equities rose on speculation the world’s largest economy is strong enough to withstand higher borrowing costs. The market-implied odds of a Federal Reserve hike in December reached 100 percent, according to Bloomberg calculations based on futures. A rate increase “could well become appropriate relatively soon,” Fed Chair Janet Yellen said last week. The fresh stock highs also came as American companies ended a five-quarter profit slump.

“We’ve finally broken through to new records,” said Heinz-Gerd Sonnenschein, an equity strategist at Deutsche Postbank AG in Bonn, Germany. “We can move on to pricing in the improving outlook: there are strong signs that the U.S. economy is in good shape and that bodes well for corporate earnings.”

Sales of previously owned U.S. homes unexpectedly climbed in October to the highest level since February 2007, a sign of momentum in the housing market a month before a jump in borrowing costs, National Association of Realtors data showed Tuesday. Reports on new home sales, durable goods and manufacturing are due Wednesday, as well as minutes from this month’s Fed meeting. U.S. markets will be closed Thursday for the Thanksgiving holiday.

Stocks

MSCI’s global gauge rose 0.3 percent at 4 p.m. in New York, on course for its biggest monthly advance since July.

The S&P 500 Index rose 0.2 percent to 2,202.86, the Dow Average and the Nasdaq added at least 0.3 percent. The Russell 2000 gained for a 13th day in the longest run since 1996.

The Stoxx Europe 600 Index increased 0.2 percent as Anglo American Plc and BHP Billiton Ltd. rose at least 4.9 percent. Enel SpA led gains in utilities after announcing a plan to cut costs and dispose assets of about 3 billion euros ($3.2 billion).

The MSCI Emerging Markets Index extended a two-day rally to 1.7 percent as benchmark gauges from Brazil to China and Russia advanced.

Commodities

The Bloomberg Commodity Index posted its biggest three-day advance since June. Goldman Sachs Group Inc. said Monday that investors should bet on higher prices in the next year as manufacturing picks up around the world, the first time the bank has recommended an overweight position for the asset class in more than four years.

Gold extended a rebound from the lowest in more than five months, while copper surged to the highest since July 2015. Iron ore and steel in China surged to their daily limits.

West Texas Intermediate for January delivery fell 21 cents to $48.03 a barrel on the New York Mercantile Exchange.

OPEC talks in Vienna Tuesday haven’t resolved the question of whether Iraq and Iran will participate in any production cuts and will defer the matter to the meeting of ministers on Nov. 30, according to two delegates.

Currencies

The dollar fluctuated against its major peers as traders looked beyond the Federal Reserve’s December policy meeting in search of fresh impetus.

A gauge of the U.S. currency was little changed Tuesday after climbing to levels last seen in January a day earlier. The dollar has tracked Treasury yields higher as futures traders fully priced in an interest-rate hike for the Federal Reserve’s Dec. 14 policy decision partly on speculation that President-elect Donald Trump’s economic policies will fuel inflation.

"The dollar is flying after Donald Trump’s victory, and the rally should continue into early 2017 -- thereafter, the greenback could weaken," Royce Mendes, an economist at CIBC World Markets, wrote in a note. "Although that’s fully priced into markets, the delivery of the first hike since 2015 could see markets add to expectations for further tightening, giving the dollar a temporary boost."

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, rose 0.1 percent. The greenback gained 0.2 percent to 111.07 yen.

China’s central bank raised its yuan fixing for the first time in 13 days as the dollar’s ascent eased. The rand climbed after the South African government said it would delay a plan to build new nuclear power plants, allaying concern that the cost of the program would strain fiscal targets.

Bonds

Bonds climbed across Europe, finding relief after weeks of being whipsawed by political headlines and speculation about higher U.S. interest rates. With the next ECB policy decision due in December, investors are looking for clues in a series of recent remarks from officials who pledged to maintain current levels of monetary stimulus.

Officials from the ECB are signaling they “are not intending to reduce its monetary stimulus soon,” said Marius Daheim, a senior rates strategist at SEB AG in Frankfurt. “That points to divergence between monetary policy in the U.S., where we are looking for a rate hike in December by the Fed, and the ECB maintaining its steady hand and continuing with its ultra-loose monetary policy. That’s what is creating this payback.”

ECB President Mario Draghi said on Monday that the central bank is “committed to preserving the very substantial degree of monetary accommodation necessary to secure a sustained convergence of inflation toward” the target of just under 2 percent. This followed comments from Governing Council members Benoit Coeure and Francois Villeroy de Galhau on Monday signaling the time to start scaling down the QE program has not yet arrived.

The yield on benchmark notes due in 10 years was little changed at 2.32 percent, according to Bloomberg Bond Trader Data.

--With assistance from Emma O'Brien Cecile Vannucci Stephen Kirkland Lynn Thomasson Choong En Han Neil Denslow Marianna Aragao Sofia Horta e Costa Richard Frost Paul Dobson Sarah McDonald David Goodman Anooja Debnath Chikako Mogi Kevin Buckland Sophie Caronello and Andrea Wong

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net, Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net.

To contact the editor responsible for this story: Rita Nazareth at rnazareth@bloomberg.net.

©2016 Bloomberg L.P.

© Copyright 2017 Bloomberg News. All rights reserved.

   
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(Bloomberg) -- All four major U.S. stock benchmarks rallied to records, with the Dow Jones Industrial Average topping 19,000 for the first time. Metals climbed, while oil fell.The Dow Average joined the S P 500 Index, the Nasdaq Composite Index and the Russell 2000 Index of...
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Tuesday, 22 Nov 2016 04:28 PM
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