Oxstones Investment Club™By Stephen Kirkland and Rita Nazareth
Stocks rose, extending the biggest two-day rally in the Standard & Poor’s 500 Index since September, and commodities gained as U.S. home sales and retail purchases topped estimates and Goldman Sachs Group Inc. advised buying banks. Cotton and cocoa led an advance in raw materials.
The S&P 500 climbed 1 percent at 1:33 p.m. in New York and is up 3.2 percent for the first two days of December. The Stoxx Europe 600 Index gained 1.7 percent and the euro rose 0.4 percent to $1.3193 as the European Central Bank extended an emergency loan program. Spain’s IBEX 35 rallied 2.8 percent and the yield on the country’s 10-year bond fell 21 basis points to 5.13 percent as demand rose at a note sale. Ten-year Treasury yields erased gains and were little changed at 2.97 percent.
Equities advanced for a second day as a record 10 percent increase in pending home resales and higher-than-estimated sales at chain stores from Abercrombie & Fitch Co. to Limited Brands Inc. added to evidence the U.S. economic recovery is gaining momentum. Goldman Sachs raised its rating on U.S. financial stocks to “overweight” and predicted a 20 percent rally in the S&P 500 by the end of next year as the economy improves.
“The market is being helped by news on home sales and the latest consumer spending,” said Alan Gayle, senior investment strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees $63 billion. “The hope is that if the economy improves the financial-services stocks will do better.”
Limited Brands, Abercrombie
Banks led gains in the S&P 500 after Goldman Sachs highlighted JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. among its “top stock ideas across financials,” triggering rallies of at least 2.2 percent in each.
All 12 stocks in an S&P gauge of homebuilders advanced after the National Association of Realtors said its index of pending home resales jumped a record 10 percent in October.
Abercrombie & Fitch surged 11 percent after same-store sales topped estimates at the clothing chain. November comparable store sales rose 5.3 percent at U.S. retailers, compared with a 3.5 percent estimate, Retail Metrics Inc. president Ken Perkins said in an interview.
Ten stocks rose for each that fell in Europe’s Stoxx 600. The ECB delayed its withdrawal of emergency liquidity measures and bought more government bonds as President Jean-Claude Trichet pledged to fight “acute” financial market tensions. The ECB will offer banks unlimited loans through the first quarter, Trichet told reporters at a press conference in Frankfurt. Irish and Portuguese bonds surged as ECB officials embarked on a new round of debt purchases, according to traders with knowledge of the transactions. The 10-year Portugal yield decreased by 55 basis points, or 0.55 percentage point, and Ireland’s 10-year rate slid 36 basis points.
The ECB met under pressure from investors to stop the debt turmoil from engulfing Spain, the euro-area’s fourth largest economy, after the Irish rescue four days ago failed to persuade markets that policy makers have the resolve needed to contain it.
Spanish banks advanced, with Banco Santander SA rallying 5.1 percent and Banco Bilbao Vizcaya Argentaria SA, the nation’s second-biggest lender, gaining 4.2 percent. Spain’s 10-year bond yield decreased 25 basis points to 5.00 percent.
Credit-default swaps on European debt fell for a second day amid optimism policy makers will maintain support for the region’s sovereign bond market. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high- yield credit ratings fell 30.5 basis points to 473.
The MSCI Asia Pacific Index rallied 1.7 percent, the most in a month. Canon Inc., a Japanese camera maker, rose 2.5 percent. The MSCI Emerging Markets Index climbed 1.7 percent and is up 3.7 percent over the past two days, its biggest rally since May. South Africa’s rand, Hungary’s forint and the Colombian peso led developing-nation currencies, strengthening more than 1.4 percent against the dollar.
Russia’s Wimm-Bill-Dann Dairy & Juice Co. soared 58 percent after PepsiCo Inc. said it will acquire 66 percent of the dairy company for $3.8 billion.
Spanish Bond Sale
The Spanish three-year note yield slid 34 basis points to 3.72 percent. The extra yield investors demand to hold the nation’s 10-year bonds instead of benchmark German bunds dropped 23 basis points to 227 basis points. Yields on similar-maturity Greek securities fell 16 basis points to 11.65 percent.
Spain sold 2.5 billion euros ($3.3 billion) of notes due in October 2013. Demand was 2.27 times the amount sold, compared with a bid-to-cover of 2.16 at the October sale.
Copper rose 0.9 percent to $3.9785 a pound in New York, while gold for immediate delivery was little changed around $1,388 an ounce. The Standard & Poor’s GSCI Index of commodities gained 1.2 percent.
Oil climbed 1 percent to $87.62 a barrel in New York. Cotton, wheat and cocoa jumped more than 3.6 percent each, while gasoline and orange juiced gained at least 1.8 percent.
Tags: commodities, Spanish Bond Sale, US Home Sales