U.S. stocks climbed the most in three weeks as data stoked optimism in the economy, while Treasurys pared losses as Federal Reserve meeting minutes indicated concern over the outlook for inflation. Oil in New York rallied.
The Standard & Poor’s 500 Index closed 1.2 percent higher by 4 p.m. in New York, halting its longest run of losses in 13 months as consumer stocks gained. Ten-year Treasury yields added two basis points to 1.96 percent, after earlier rising as much as seven basis points. The dollar gained against major peers, with the euro sliding to a nine-year low after data showed a drop in consumer prices. West Texas Intermediate crude rebounded from a 5 1/2-year low amid strong demand from U.S. refineries.
Most Fed officials agreed that their commitment last month to be “patient” on raising interest rates meant they were unlikely to move on borrowing costs before late April, according to minutes of their December meeting. A number expressed concern inflation could remain too slow. Policy makers also said that weakness in the global economy may pose a threat to the U.S. recovery, while concluding that those risks were “nearly balanced” by positive developments in America.
“From the Fed’s perspective, they’re seeing more of the same,” Stephen Wood, chief market strategist at Russell Investments in New York, said by phone. “The Fed has used forward guidance more effectively and the markets are responding to a consistent message and consistent policy path. The takeaway is the Fed isn’t changing anything any time soon.”
Oil Impact
Some Fed officials said slumping oil prices could reduce longer-term inflation expectations, while others were concerned a drop in market-based inflation measures might reflect that “such a decline had already begun.” Chair Janet Yellen said after last month’s meeting that the central bank will probably hold rates near zero through at least the first quarter.
WTI reversed earlier declines to climb 1.5 percent in New York, settling at $48.65 a barrel after posting a 15 percent drop through yesterday since the Fed’s December meeting. A combination of rising supply as U.S. production picks up and slower growth overseas that’s reducing demand is leading to a rout in oil prices that has continued into 2015.
The S&P 500 had plunged 4.2 percent over the five days through yesterday, with energy stocks down 4.5 percent so far this year, the worst performance among 10 industry groups. Sub- indexes of health-care companies, as well as consumer staple and consumer-discretionary stocks led gains today, rising at least 1.5 percent.
Bullish Data
Data in the U.S. today showed the trade deficit narrowed more than economists forecast in November, while companies added more workers than estimated in December.
Companies in the U.S. added 241,000 workers in December, figures from ADP Research Institute showed today, with monthly payrolls data from the government due later this week. The trade gap shrank 7.7 percent to $39 billion, the smallest since December 2013, Commerce Department figures showed.
“The U.S. has clearly been ahead of the game,” Peter Dixon, global equities economist at Commerzbank AG in London, said by phone. “Growth is on a stronger footing. Oil has gone down but in some ways the shock is way overdone. I’d expect markets to recoup some of the ground they’ve lost in recent weeks.”
Euro-area consumer prices fell for the first time since 2009, with oil’s decline frustrating efforts to stave off deflation in the 18-nation region. Prices slid 0.2 percent in December, the European Union’s statistics office said. Economists had predicted a decline of 0.1 percent.
European Stocks
European equities gained, with the Stoxx Europe 600 Index snapping a three-day drop, as lawmakers in Chancellor Angela Merkel’s coalition said Germany is leaving the door open to debt-relief talks with Greece’s next government, signaling a more flexible stance than her administration has taken publicly, according to Bloomberg News.
Greece’s ASE Index extended losses, falling 1.5 percent to its lowest level since 2012 before the report.
While writing off Greek debt isn’t on the table, talks on easing repayment terms on the aid that Greece received from European governments are possible after the country’s parliamentary elections Jan. 25, the lawmakers from Germany’s two biggest governing parties said.
The Stoxx Europe 600 has fallen more than 5 percent from an almost seven-year high reached last month amid growing concern over Greece. Prime Minister Antonis Samaras said the snap election, called after the parliament refused to endorse his pick for president, could lead to the nation exiting the euro area. European oil-and-gas companies have also tumbled with crude prices.
Currency Markets
The euro slid as much as 0.7 percent to $1.1802, its weakest intraday level since Jan. 2, 2006. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, jumped 0.2 percent to its highest level since the gauge was started at the end of 2004. The yen sank 0.6 percent to 119.15 per dollar following a two-day gain of 1.8 percent.
The MSCI Emerging Markets Index rose for the first time in five days, adding 0.8 percent, as benchmark equity gauges in Brazil, Poland and Thailand gained at least 1.4 percent. The Shanghai Composite Index added 0.7 percent.
Shares in the Middle East rebounded, with the Dubai Financial Market Index climbing 4.4 percent and rallying from a three-week low. Abu Dhabi’s ADX General Index ended a three-day decline, rising 2.6 percent, and Saudi Arabia’s Tadawul All Share Index increased 0.9 percent.
Gold futures fell after the Fed minutes failed to alter the outlook for rate increases this year. Contracts for immediate delivery slipped 0.3 percent to $1,214.78 an ounce in New York after gaining 3.1 percent over the previous three sessions. Nickel jumped 1.9 percent in London
Corn sank 2.2 percent amid declines in U.S. ethanol output, while wheat futures declined 2.1 percent for their first drop in three sessions.
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