U.S. Stocks, Copper Advance as Dollar Declines 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 10-week high as the dollar fell after new home sales beat estimates and FedEx Corp. boosted its forecast.
The Dow climbed 100.81 points, or 1 percent, to 10,525.43 at 4 p.m. New York time. The Standard & Poor’s 500 Index gained 1.1 percent to the highest level since June 18, driven by homebuilders and transportation companies. Copper futures increased 1.2 percent, while the dollar weakened against all 16 of its most-traded counterparts including the euro and yen.
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 35 percent in 2010 and 17 percent in 2011, according to forecasts tracked by Bloomberg.
Homebuilders, Shippers
Homebuilders in the S&P 500 rallied 3.6 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 2.6 percent to the highest level since May 14 after FedEx said higher demand for international express shipments prompted it to raise its earnings forecast. FedEx rallied 5.6 percent in U.S. trading. UPS climbed 1.9 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.
Diverging Opinions
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.
European stocks climbed for a fifth day as stress-test results that showed the majority of the region’s banks are adequately capitalized pushed financial companies higher. The Stoxx Europe 600 Index rose 0.5 percent to 257.12, the highest level since June 21.
Allied Irish Banks Plc and Dexia SA rallied more than 5 percent, leading a gauge of banks higher. BP Plc gained 4.6 percent as two people familiar with the matter said the company plans to name Robert Dudley to replace Tony Hayward as chief executive officer. GlaxoSmithKline Plc lost 1.3 percent after a report that the U.K.’s largest drugmaker may be interested in buying Genzyme Corp.
Copper Stockpiles
Copper climbed to a 10-week high as shrinking inventories and rising home sales signaled improving demand. Stockpiles monitored by the London Metal Exchange have slumped 7.7 percent in July, the biggest monthly decline since June 2009. Copper for September delivery gained 1.2 percent, to $3.223 a pound. Earlier, the metal touched $3.238, the highest level for a most- active contract since May 13.
The dollar fell 0.7 percent to $1.2993 per euro. Sterling rose to a three-month high against the dollar after the U.K.’s major banks passed European Union stress tests. The dollar dropped for a third day against the euro on reduced demand for the currency as a refuge.
“Risk appetite appears to be returning,” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage. “There’s definitely a welcome upside surprise to data.”
Corn fell to the lowest price in three weeks, soybeans dropped the most since June and wheat declined for a second session on signs that rain is reviving U.S. crops threatened by dry weather earlier this month.
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