Tags: stocks | earnings | Treasurys | market

Stocks Rally on Earnings, Confidence Data, While Treasurys Slide

Tuesday, 28 October 2014 04:54 PM

U.S. stocks rallied, pushing the Standard & Poor’s 500 Index to within 1.5 percent of a record, after corporate results topped estimates and consumer confidence surged as Federal Reserve officials start a two-day meeting. The dollar retreated with Treasurys.

The S&P 500 Index rose 1.2 percent to a one-month high at 4 p.m. in New York, while the Russell 2000 Index of small companies surged 2.9 percent for its best day since June 2012. The Stoxx Europe 600 Index climbed 1 percent after two days of losses. Emerging market shares surged the most in 11 months as Brazil rebounded. Benchmark 10-year note yields rose three basis points to 2.28 percent. Copper added 0.9 percent. The Bloomberg Dollar Spot Index dropped 0.3 percent.

Confidence among U.S. consumers rose in October to a seven- month high as gasoline prices dropped and the job market improved. Separate data showed durable goods orders unexpectedly fell in September and a gauge of home prices showed slower growth. The Fed is on pace to end its monthly bond-buying and leave its key interest rate unchanged near zero, according to Bloomberg surveys of analysts. Facebook Inc. is among U.S. companies scheduled to release earnings.

“There’s a continued slew of earnings and the numbers overall are good,” Mark Kepner, an equity trader at Chatham, New Jersey-based Themis Trading LLC, said by phone. “Consumer confidence was a strong number, seeing those sub-$3 gasoline prices is exciting for consumers. What’s happening is you start to think about what $80 oil means and what that means for future earnings.”

Earnings Scorecard

The S&P 500 has rebounded 6.6 percent since a low on Oct. 15 amid better-than-expected earnings and signs of a strengthening economy even as the Fed prepares to end its bond purchases.

About 80 percent of S&P 500 companies that have posted quarterly earnings this season have topped analysts’ estimates for profit, while 61 percent beat sales projections, data compiled by Bloomberg show.

Some of the biggest decliners in the selloff that began Sept. 19 led gains today. The Dow Jones Transportation Average jumped 1.5 percent for its 10th gain in 11 sessions. The gauge has advanced 13 percent since Oct. 13 to an all-time high.

The Russell 2000’s gain today pushed its rally from an Oct. 13 low to 9.5 percent. The Nasdaq Biotechnology Index surged 1.3 percent to a record.

Industrial shares and energy producers paced gains among the 10 main S&P 500 groups today with advances of at least 1.7 percent.

Parker-Hannifin Corp. jumped 4.9 percent after raising the low end of its profit estimate. Amgen Inc. rose 6.1 percent after the maker of arthritis treatment Enbrel raised its 2014 forecast. Twitter Inc. sank 9.8 percent after reporting another quarter of decelerating growth.

Yahoo! Inc. surged 2.6 percent for a ninth straight gain, the longest rally since 2006. The stock has gained 21 percent during the streak to close at the highest since September 2000.

Oil Slump

West Texas Intermediate crude rose for the first time in three days after futures touched $79.44 yesterday, the lowest intraday level since June 29, 2012. Prices have slipped 11 percent this month on signs that global oil production is growing faster than demand for fuel.

The Conference Board’s confidence index climbed to 94.5 this month, the highest since October 2007, from a September reading of 89 that was stronger than initially estimated.

“The consumer really has the wind at their backs,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. “The consumer at this point seems to have the wherewithal to power the economy forward.”

Fed policy makers began their two-day policy meeting today and will end their bond-buying program as planned, according to 62 of 64 economists surveyed by Bloomberg News. By smaller margins, most also expect the officials to reiterate rates will stay low for a “considerable time” and that there’s a “significant underutilization of labor resources.”

Data Watch

Minutes from the last meeting showed officials expressed concern that U.S. growth may be at risk from a global slowdown.

Durable goods orders dropped for a second month, on waning demand for machinery and computers that signals companies are reluctant to invest in updating equipment. The S&P/Case-Shiller index of property values rose at a weaker pace in the year ended in August as borrowing standards remain tight and wage gains fail to accelerate.

“The Fed meeting takes priority for the moment,” Neil Grossman, the St. Petersburg, Florida-based chief investment officer at Tkng Capital Partners, said in a phone interview. “Durables were weak and overall those numbers are down, but in the bigger scheme of things with everything going on, it’s marginal. They’re on track to normalize rates.”

In Europe, all but one of the 19 industry groups in the Stoxx 600 gained as the gauge advanced for the first time in three days.

Europe Equities

Novartis AG, the world’s biggest drugmaker by sales, climbed 1.9 percent and Roche Holding AG gained 0.6 percent. UBS AG added 5.5 percent as Switzerland’s biggest bank set aside 1.84 billion Swiss francs ($1.94 billion) for litigation provisions, easing investor concern about the future cost of legal challenges.

The MSCI Emerging Markets Index climbed 1.6 percent, the most since November, as Brazil’s Ibovespa rebounded 3.6 percent after President Dilma Rousseff’s re-election sent valuations to a six-month low.

The real strengthened 1.5 percent versus the dollar on speculation its drop yesterday was excessive.

The Micex rose 1.5 percent, advancing for a third day, as Russia’s acceptance of the outcome of Ukraine’s weekend elections increased bets sanctions will be relaxed.

China Stocks

Gauges of Chinese shares rallied more than 2 percent after industrial profits increased and President Xi Jinping signaled a nationwide expansion of free-trade zones.

The Shanghai Composite Index halted a five-day losing streak, climbing 2.1 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong surged 2.4 percent, the most in seven weeks. Taiwan’s Taiex jumped 1.7 percent.

The dollar dropped 0.4 percent to $1.2756 per euro. It rose 0.3 percent to 108.14 yen. Japan’s currency fell 0.6 percent to 137.71 per euro.

Sweden’s currency dropped at least 0.1 percent against all of its 16 major counterparts following the central bank’s decision to cut interest rates.

Gold futures rose less than 0.1 percent to settle at $1,229.40 an ounce in New York as investors awaited the conclusion of the Fed’s meeting. The metal earlier fell to a two-week low.

Bullion rebounded as much as 6.1 from this year’s low reaced on Oct. 6 after the Fed cited slowing foreign economies as a risk to the U.S.

Traders have cut the probability the central bank will raise borrowing costs by October 2015 to a 49 percent chance from 79 percent odds on Sept. 30. Rising interest rates reduce gold’s allure because the metal generally only offers investors returns through price gains.

U.S. crude stockpiles probably expanded to the highest level since July last week, a Bloomberg News survey showed before a government report tomorrow. Prices have slumped about 25 percent since June.

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U.S. stocks rallied, pushing the Standard Poor's 500 Index to within 1.5 percent of a record, after corporate results topped estimates and consumer confidence surged as Federal Reserve officials start a two-day meeting.
stocks, earnings, Treasurys, market
Tuesday, 28 October 2014 04:54 PM
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