U.S. Stocks Gain as Yen, Treasuries Drop

U.S. Stocks Gain as Yen, Treasuries Drop on Bernanke Bets

By Rita Nazareth and David Merritt

Jan. 25 (Bloomberg) -- U.S. stocks advanced, while the yen and two-year Treasury notes retreated, as investors grew more confident that Ben S. Bernanke will be reconfirmed as chairman of the Federal Reserve.

The Standard & Poor’s 500 Index added 0.5 percent at 10:50 a.m. in New York after plunging 5.1 percent in the previous three sessions, its biggest slide since March. The Hang Seng Index, which was closed when U.S. markets tumbled on Jan. 22, slid 0.6 percent into a correction as its losses since the November high touched 10 percent. The yen fell against all 16 of its most-traded counterparts as investors returned to higher- yielding currencies and risky assets. Two-year notes retreated, driving their yield up 2 basis points to 0.83 percent.

“We sold off a in a big hurry and many are probably looking around and saying things are getting better,” said Bruce McCain, chief investment strategist at Cleveland-based Key Private Bank, which manages $22 billion. “Bernanke’s potential reappointment also helps. By and large, the investment community has been very pleased with his performance and to have him rejected just opens up the uncertainty that drives the market into turmoil.”

Bernanke will be reappointed as Fed chairman, according to Mitch McConnell, the senior Senate Republican. Concern that some Democrats might block him helped drive the S&P 500 down 2.2 percent on Jan. 22. Last week’s slump came even as 46 of the 62 S&P 500 companies that reported earnings topped the average forecast.

U.S. Rebound

The S&P 500 rebounded from its biggest three-day decline since March, when its rally of as much as 70 percent began. The S&P 500 still is up more than 61 percent from a 12-year low on March 9, with a valuation of about 14.2 times the combined operating earnings forecast for its companies this year. More than 130 companies in the benchmark gauge for U.S. equities are scheduled to release results this week. A record nine-quarter earnings slump is projected to have ended in the fourth quarter with a 73 percent increase in S&P 500 profits.

“We believe recent market weakness is a buying opportunity,” Credit Suisse Group AG analysts led by Andrew Garthwaite in London wrote in a note. “Both earnings revisions and economic surprises remain positive.”

The yen weakened the most against the New Zealand dollar, losing 0.9 percent. The U.S. dollar fell against 14 of 16 major currencies, losing 0.6 percent versus the Mexican peso and New Zealand dollar .The yen also declined after people familiar with the matter said Bank of Japan policy makers are prepared to consider expanding an emergency-loan program for banks and increasing purchases of government debt.

Bonds Slip

The yield on the benchmark ten-year U.S. note climbed two basis points to 3.62 percent. The Treasury will auction $44 billion of the notes tomorrow, part of a record-tying $118 billion of debt being sold this week.

The U.S. economy grew in the third quarter for the first time in more than a year, and may have expanded at a 4.6 percent rate in the fourth quarter, the fastest pace in four years, according to the median estimate of economists surveyed by Bloomberg. The Commerce Department will give its fourth-quarter gross-domestic product estimate on Jan. 29.

In Europe, the Dow Jones Stoxx 600 Index slipped 0.5 percent. Ericsson AB, the world’s biggest maker of wireless networks, sank 1.3 percent in Stockholm after reporting a 92 percent plunge in profit. Royal Philips Electronics NV, Europe’s biggest consumer-electronics maker, climbed 5.1 percent in Amsterdam after posting a third straight quarterly profit.

Greek Bonds, Stocks

Greek stocks gained the most in nearly three weeks as demand for the country’s first bond sale of the year eased concern that the government will struggle to fund its deficit.

The benchmark ASE Index rose 2.8 percent for a second day of gains. National Bank of Greece SA, the country’s largest, helped lead the advance with a 3 percent gain in Athens. Greece’s 10-year bond rose, sending its yield down seven basis points to 6.19 percent.

The MSCI Asia Pacific Index lost 0.7 percent as Bank of China Ltd. fell 2.1 percent in Hong Kong and Honda Motor Co., which gets 42 percent of its sales from North America, declined 1.7 percent in Tokyo.

Declines in Asian shares drove the MSCI Emerging Markets Index down 0.4 percent, headed for the lowest close in a month. Dubai’s DFM General Index rebounded 2.8 percent after a 5 percent drop yesterday.

Copper for delivery in three months rose 0.8 percent to $7,450 a metric ton on the London Metal Exchange. Gold, aluminum and lead also increased.