Dollar Fall on Housing Data

Stocks, Copper Gain as Treasuries, Dollar Fall on Housing Data

By Stephanie Borise and Nikolaj Gammeltoft

July 26 (Bloomberg) -- U.S. stocks rose, erasing the Dow Jones Industrial Average’s 2010 loss, and copper advanced to a two-month high as Treasuries and the dollar fell after new home sales beat estimates and FedEx Corp. boosted its forecast.

The Dow climbed 66.15 points, or 0.6 percent, to 10,490.77 at 12:03 p.m. New York time. The Standard & Poor’s 500 Index gained 0.9 percent, led by homebuilders and transportation companies. Copper futures increased 1.5 percent. Yields on 10- year Treasuries reached 3.03 percent, the highest since July 15. The dollar weakened against the 16 most-traded currencies.

Sales of U.S. new homes rose in June more than forecast following an unprecedented collapse the prior month, a signal the worst of the slump triggered by the end of a government tax credit is over. FedEx joined United Parcel Service Inc., the largest package delivery company, in lifting its earnings forecasts. Both are considered harbingers for the economy.

“I’m more optimistic,” said Traxis Partners LLC’s Barton Biggs, who added that he doubled his equity holdings this month after slashing them in half. Biggs returned 38 percent in 2009, triple the industry average. “I’ve definitely changed my mind to the degree of risk out there,” he said.

U.S. companies are beating forecasts, and analysts see the biggest two-year earnings increase since 1995. More than 83 percent of S&P 500 companies have exceeded the average analyst profit estimate since July 12. S&P 500 profits may rise 34 percent in 2010 and 17 percent in 2011, according to forecasts tracked by Bloomberg.

Homebuilders, Shippers

Homebuilders in the S&P 500 rallied 4 percent, led by Pulte Group Inc. and Lennar Corp., and copper gained after sales of new U.S. homes increased 24 percent from May to an annual pace of 330,000, figures from the Commerce Department showed. The rate was the second-lowest in data going back to 1963 after May’s downwardly revised 267,000 pace.

The Dow Jones Transportation Average jumped 2.5 percent to a one-month high after FedEx said higher demand for international express shipments prompted it to raise its earnings forecast. UPS climbed 1.5 percent. The company said July 22 that the U.S. economy will continue to recover.

Mutual funds, pensions and endowments are spending more on stocks than at any time since the start of the bull market, just as individuals grow the most pessimistic in a year.

Institutions pushed equities up to 68 percent of their holdings in July, the highest level in 15 months, from 63 percent in April, a Citigroup Inc. survey showed. The ratio of bullish to bearish respondents in a survey by the American Association of Individual Investors has fallen to 0.68, the lowest level since July 2009, based on a four-week average.

The last time money managers and individuals were this far apart was in March 2009, before the S&P 500 began its 63 percent rally, according to data compiled by Bloomberg.