By Michael P. Regan and Rita Nazareth
Jan. 19 (Bloomberg) -- U.S. stocks rose, boosted by a rally in health companies on speculation Republicans will block an industry overhaul, while Treasuries fell for the first time in three days and the dollar strengthened.
The Standard & Poor’s 500 Index added 1.3 percent to a 15- month high of 1,150.23 at 4:09 p.m. in New York. The yield on the benchmark 10-year Treasury rose two basis points to 3.7 percent. The Dollar Index, which gauges the currency against six major U.S. trading partners, rallied 0.5 percent. Europe’s Dow Jones Stoxx 600 Index erased an earlier decline. British government bonds tumbled after the U.K. inflation rate increased by the most on record. Oil rose for the first time in six days.
“Money is finding its way out of Treasuries and into the stock market,” said Mark Bronzo, a money manager in Irvington, New York, at Security Global Investors, which oversees $22 billion. “Investors are expecting good earnings, especially from technology companies. In addition to that, health-care stocks are rallying because a Republican victory in Massachusetts might change the debate.”
An index of health-care companies in the S&P 500 led the advance with a 2 percent rally as Merck & Co. and Pfizer Inc. gained more than 2.6 percent. U.S. Democrats face the possibility of losing a Senate seat held by the late Edward Kennedy as voters in Massachusetts went to the polls. A loss could cost the party a 60-vote supermajority needed to help pass a health-care overhaul.
Ciena Corp. surged 11 percent to lead an advance in technology companies after Credit Suisse Group AG advised buying the shares on prospects for revenue growth. As many as 65 companies in the S&P 500 are scheduled to release results this week. Combined earnings increased 67 percent in the fourth quarter for companies in the index, according to a Bloomberg survey of analysts, after a record nine quarters of declines.
Valuations Climb
The S&P 500 is up 70 percent since reaching a 12-year low in March. The biggest stock market rally since the Great Depression boosted the index’s price-earnings multiple to a seven-year high 25 last week from 10.1 in March, the lowest in a quarter-century, data compiled by Bloomberg show.
The MSCI World Index of 23 developed markets added 0.5 percent after slumping 0.8 percent earlier. Companies in the measure are trading near the highest level compared with earnings since 2002, raising concern valuations may have outpaced profit growth.
The Dow Jones Stoxx 600 Index added 0.8 percent, reversing an earlier 0.9 percent slump. Earlier declines came as an industry report showed German investor confidence decreased more than economists estimated in January as the economic recovery showed signs of losing momentum.
German Confidence
The ZEW Center for European Economic Research said its index of investor and analyst expectations in Europe’s largest economy, which aims to predict developments six months ahead, fell to 47.2 from 50.4 in December. Economists predicted a drop to 50, according to the median of 37 forecasts in a Bloomberg News survey.
Cadbury Plc jumped 3.6 percent after Kraft Foods Inc. agreed to buy the chocolate maker for an increased $19.5 billion. Kraft slipped 0.6 percent.
The British pound strengthened against 15 of 16 major counterparts, gaining 0.9 percent versus the Swiss franc and 0.8 percent against the euro. December consumer prices advanced 2.9 percent in the U.K. from a year earlier, one full percentage point more than in November, according to the Office for National Statistics.
Gilts Slide
U.K. government bonds tumbled after the report, sending the yield on the two-year note 10 basis points higher to 1.3 percent.
The MSCI Asia Pacific Index declined 0.8 percent.
Aluminum Corp. of China, known as Chalco, declined 0.2 percent in Hong Kong after saying it expects to post a net loss for 2009. Mitsubishi UFJ Financial Group Inc., Japan’s largest publicly traded bank, slipped 2.4 percent in Tokyo after Barclays Plc said banks’ income from lending may slump.
Losses in Asia were limited after Hong Kong’s Hang Seng Index doubled its gain to 1 percent on a report in Caijing magazine that Shanghai, China’s financial hub, is considering allowing individuals to invest abroad.
Copper futures for March delivery added 8.1 cents, or 2.4 percent, to $3.447 a pound on the New York Mercantile Exchange’s Comex unit on speculation demand will remain strong in China, the biggest user of the metal. Earlier, the commodity touched $3.46, the highest price for a most-active contract since Jan. 12.
Oil Gains
Oil rose from a three-week low as U.S. equities climbed. Crude for February delivery added $1.02, or 1.3 percent, to $79.02 a barrel in New York. Prices touched $76.76 earlier, the lowest since Dec. 24. February futures expire tomorrow. The more-active March contract increased 95 cents to $79.32.
The cost to protect against defaults on U.S. corporate bonds rose as a benchmark credit derivatives index reached the highest level in more than two weeks. Swaps on the Markit CDX North America Investment-Grade Index Series 13, which is linked to 125 companies and used to speculate on creditworthiness or to hedge against losses, increased 1.5 basis point from Jan. 15 to a mid-price of 85 basis points as of 12:10 p.m. in New York, according to CMA DataVision. A rise in the index signals a decline in investor confidence.
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