U.S. stocks rose and a gauge of global equities entered a bull market as investors awaited the outcome of negotiations on steps to tame Greece’s debt crisis. The euro and Treasuries were little changed.
The Standard & Poor’s 500 Index added 0.2 percent to a seven-month high of 1,349.96 at 4 p.m. in New York. The MSCI All-Country World Index climbed 0.3 percent, extending its gain from last year’s low to 20 percent. The euro fluctuated near $1.3260 after yesterday reaching an almost two-month high. Ten- year U.S. Treasury yields climbed less than one basis point to 1.98 percent after earlier topping 2 percent for the first time in two weeks. The S&P GSCI Index of commodities increased 0.3 percent as gasoline, copper and Brent crude led gains.
Greek Prime Minister Lucas Papademosbegan negotiating with political parties supporting his government on measures needed to qualify for rescue funds after postponing the meeting yesterday. Greece is promising to cut spending and sell stakes in six companies to qualify for a second bailout, according to a draft of the new financing deal.
“It seems as if everyone is holding their breath and waiting for some kind of resolution in Greece to let us know what direction to take next,” Michelle Gibley, senior market analyst at San Francisco-based Charles Schwab Corp., said in a telephone interview. Her firm has $1.68 trillion in client assets. “A deal will be made ultimately, but policy makers have already proven that deadlines mean little to them.”
Bull Market
The S&P 500 has rebounded 23 percent from last year’s low in October amid growing confidence in the economy and better- than-forecast profits. Profits have topped analyst estimates at 68 percent of the 301 companies in the index that have reported results since Jan. 9. Earnings-per-share have increased 3.4 percent for the group on 6.6 percent growth in sales.
Gains in commodity, industrial and financial companies drove global stocks into a bull market as U.S. economic data improved and Europe moved closer to a solution to the region’s debt crisis. Seagate Technology Plc, the world’s largest maker of computer disk drives, and Cemex SAB, the largest cement maker in the Americas, surged at least 171 percent since Oct. 4 to lead the advances in the MSCI index.
January Rally
The MSCI gauge, which tracks equities in 45 developed and emerging countries, rose 5.7 percent last month for the best performance during any January since 1994, according to data compiled by Bloomberg. It has rallied 9.2 percent so far this year, almost wiping out its 2011 slump. The Stoxx Europe 600 Index, which entered a bull market on Jan. 26, has climbed 7.6 percent in 2012.
Investor confidence improved after the European Central Bank announced a three-year lending program for banks, the Federal Reserve said it will keep benchmark interest rates low through at least 2014 and reports showed a stronger U.S. labor market and slower Chinese inflation.
“Be 100 percent in equities,” Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest money manager, said in a Bloomberg Television interview from Hong Kong today. “I don’t have a view that the world is going to fall apart, so you need to take on more risk. You need to overcome all this noise and there are great values in equities.”
While geo-political risks have risen, including Iran’s nuclear ambitions and Syria’s bloody crackdown, investors are taking their cue from policy makers who are driving down interest rates and flooding the world with cash to prop up their economies. The VIX (VIX), a measure of equity volatility known as the “fear index,” fell to 17.1 on Feb. 3, the lowest level since July, according to the Chicago Board Options Exchange.
Market Leaders
The Dow Jones Industrial Average (INDU) increased 5.75 points today to 12,883.95, remaining at its highest level since May 2008.
Financial shares led gains among the 10 main industry groups in the S&P 500 today, with Bank of America Corp. and Citigroup Inc. climbing more than 3.5 percent. Energy stocks had the biggest decline as Exxon Mobil Corp. and Schlumberger Ltd. paced losses after oil pared an early gain. Oil settled up 0.3 percent at $98.71 a barrel after climbing as much as 1.7 percent.
Moody’s Corp. (MCO) fell 1.7 percent as the owner of the world’s second-largest provider of credit ratings said fourth-quarter profit fell 30 percent after Europe’s sovereign-debt crisis slowed bond sales around the world. Western Union Co. slumped 10 percent as the world’s largest money-transfer business forecast earnings in 2012 will be no more than $1.75 a share, less than the average analyst estimate of $1.81.
Hartford Financial Services Group Inc. climbed 7.6 percent after billionaire John Paulson demanded action to boost the stock performance and the insurer’s earnings topped estimates. Hartford, founded in 1810, hired advisers to evaluate splitting the life insurance and property-casualty businesses, the company said today.
European Stocks
European stocks dropped for a third day, with the Stoxx Europe 600 Index slipping 0.2 percent. BHP Billiton Ltd. (BHP) lost 2.3 percent in London. Vestas Wind Systems A/S tumbled 14 percent, its biggest retreat in a month, as the company posted an annual loss four times wider than analysts had estimated.
Portugal’s PSI 20 Index jumped 1.9 percent for the biggest gain among 24 global developed markets. Banco Comercial Portugues SA rose 5.1 percent in Lisbon on speculation the planned leadership change at Portugal’s second-biggest bank is prompting investors to exit trades betting on a decline. Banco Espirito Santo SA and Banco BPI SA (BPI) all surged at least 13 percent.
European Bonds
Spanish 10-year bonds slid, driving the yield 15 basis points higher as the nation plans to add to its outstanding supply of the securities due in January 2022, according to a banker involved in the transaction. The yield on the Greek 10- year bond slid 134 basis points, or 1.34 percentage points, to 32.82 percent.
Greece will pledge permanent spending cuts, including lower pension payments and a 20 percent reduction in the minimum wage, as the economy contracts this year at a faster pace than originally estimated, according to the draft of a new financing deal with the European Union and International Monetary Fund. Greece also plans to sell stakes in six companies, including Opap SA (OPAP) and the country’s biggest refiner Hellenic Petroleum SA, in the first half of this year, according to the draft
Troika Meeting
Papademos last night held an unscheduled meeting with the so-called troika, comprising the European Commission, the European Central Bank and the International Monetary Fund, to put the final touches on terms required for rescue package.
The Institute of International Finance will hold a meeting tomorrow to go over technical matters so a debt swap can be implemented quickly if an accord between Greece and the troika is reached, said two people familiar with the matter who declined to be identified because talks are private.
“Regardless of all the deal making, in the final solution, Greece, its leaders and its people are not going to agree to anything unless there is a silver lining and a return to growth,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp. “It’s not credible to think they’ll agree to measures that have recession as far as the eye can see.”
The cost of insuring against a default on European government bonds rose from the lowest in three months, with the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments climbing 4.1 basis points to 322.5.
The MSCI Emerging Markets Index rose 1.1 percent, heading for the highest close since Aug. 4. The Shanghai Composite Index advanced 2.4 percent and Taiwan’s Taiex Index jumped 2.1 percent. Russia’s Micex Index (INDEXCF) advanced for the first day this week, increasing 0.4 percent, as UBS AG upgraded the country’s equities to “overweight.”
To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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