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Stocks, Commodities Rise as Budget Talks Whipsaw Markets

By Michael P. Regan and Inyoung Hwang
November 29, 2012 4:35 PM EST 5 Comments
Copper in London gained 0.6 percent to $7,815.50 a metric ton.
Photographer: Oliver Bunic/Bloomberg
Copper in London gained 0.6 percent to $7,815.50 a metric ton.

U.S. stocks climbed for a second day in a whipsaw session amid improving economic data and optimism that lawmakers will reach an agreement on the budget. Commodities gained, while Treasuries remained higher following a $29 billion auction.

The Standard & Poor’s 500 Index closed up 0.4 percent at 1,415.95 as of 4 p.m. in New York after earlier erasing gains as Republican House Speaker John Boehner said no progress was being made in budget talks. The Stoxx Europe 600 Index surged 1.2 percent to close at the highest level since June 2011. Treasury 10-year yields fell one basis point to 1.62 percent, a fourth straight decline. The S&P GSCI Index of 24 commodities rallied 1 percent as industrial metals led gains.

Democratic Senator Chuck Schumer said there has been progress in talks and White House spokesman Jay Carney said the administration is optimistic about the negotiations, helping the market recover after Boehner’s comments snuffed out speculation lawmakers will reach a compromise. Earlier gains in stocks also followed reports today that showed the U.S. economy grew faster than previously estimated last quarter, pending home sales jumped more than forecast and jobless claims fell.

“Equity markets will be very beholden to the incremental statements regarding the fiscal cliff, either progress or lack of progress,” Jim Russell, the Cincinnati-based chief equity strategist at U.S. Bank Wealth Management, which oversees about $113 billion, said in a telephone interview.

‘Get Serious’

Boehner said President Barack Obama must “get serious” about the fiscal cliff while the speaker remains “hopeful” about talks to avert more than $600 billion in spending cuts and tax increases. Following a meeting today with Treasury Secretary Timothy Geithner and a telephone conversation with Obama last night, Boehner told reporters in Washington there has been no substantial progress in the discussions in the past few weeks.

Telephone, health-care and raw-materials companies led gains in all 10 of the main industries in the S&P 500. The benchmark gauge of U.S. stocks trimmed its retreat since the Nov. 6 election to less than 0.9 percent following a drop of as much as 5.3 percent through Nov. 15.

Apple Inc. added 1.1 percent and Advanced Micro Devices Inc. climbed more than 4 percent to lead an advance in technology stocks. Kroger Co. jumped 4.8 percent after boosting its profit projection for the year. Walt Disney Co., the world’s largest entertainment company, climbed 1.1 percent after raising its dividend. Tiffany & Co. tumbled 6.2 percent after cutting its profit forecast. Kohl’s Corp. plunged 12 percent after reporting disappointing sales for November.

Treasury Auction

Concern about the fiscal cliff spurred record demand at a $35 billion auction of seven-year Treasuries today.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased a record 19.7 percent of the notes, compared with an average of 14.4 percent at the past 10 auctions. The benchmark 10-year yield also dropped as Federal Reserve Bank of New York President William C. Dudley indicated the possibility of additional asset purchases.

The world economy is at its healthiest in 18 months as the U.S. seeks to avoid the fiscal cliff, according to the Bloomberg Global Poll of investors. Two-thirds of the 862 respondents surveyed described the global economy as either stable or improving. That’s up from just over half who said that in September and is the most since May 2011. The U.S. came out on top for the eighth straight quarter when investors were asked which markets will offer the best opportunities over the next year.

GDP Increases

U.S. gross domestic product grew at a 2.7 percent annual rate, up from a 2 percent prior estimate, revised figures from the Commerce Department showed today.

Fewer Americans filed first-time claims for unemployment insurance payments last week, with applications decreasing by 23,000 to 393,000 in the week ended Nov. 24, the Labor Department said. Another report may show pending home sales increased, according to a Bloomberg survey of economists.

The Stoxx Europe 600 Index (SXXP) rallied 1.2 percent to 276.31, the highest close since June 1, 2011. Invensys Plc jumped 8.9 percent, extending yesterday’s 27 percent gain for the biggest two-day jump on record. The U.K. engineering company may be broken up as a sale of its rail-signaling division to Siemens AG for 1.74 billion pounds ($2.78 billion) helps it reduce pension liabilities.

European Movers

Banco Popular Espanol SA advanced 5 percent. The Spanish bank completed a 2.5 billion-euro ($3.24 billion) share sale to help cover a capital shortfall. Electricite de France SA fell 1 percent and touched a record low after the country’s highest court, the Conseil D’Etat, ruled that the utility overcharged households.

The rate on Japan’s 10-year government bonds dropped to a nine-year low as the main opposition leader Shinzo Abe called for unlimited monetary policy easing by the central bank until inflation reaches 2 percent. Japan’s 10-year rate declined 1/2 basis point today to 0.71 percent, the least since 2003.

Australia’s dollar weakened against all 16 major peers, declining 0.4 percent to $1.0436, after a report showed the nation’s business investment grew at a slower pace in the third quarter.

Commodity Movers

Aluminum surged 3.2 percent and zinc and silver climbed at least 1.7 percent to lead an advance among 19 of 24 commodities tracked by the S&P GSCI Index. Oil rose for the first time in four days, climbing 1.8 percent to $88.07 a barrel. Gold futures rebounded from the biggest drop in more than three weeks, gaining 0.6 percent to $1,729.50 an ounce, on speculation the Federal Reserve will boost asset purchases.

“I will be assessing the employment and inflation outlook in order to determine whether we should continue Treasury purchases into 2013,” the New York Fed’s Dudley said today in a speech in New York.

The MSCI Emerging Markets Index added 1.3 percent, the most since Sept. 14. India’s Sensex rallied 1.8 percent after Goldman Sachs Group Inc. recommended buying the country’s stocks. The Hang Seng China Enterprises Index of mainland companies rose 0.9 percent and Russia’s Micex gained 0.5 percent.

Gold Fields Ltd. jumped 5.7 percent, leading the FTSE/JSE Africa All Shares Index to a record, on the mining company’s plans to spin off some local operations.

To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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