Stocks Advance, Treasuries Retreat on Bernanke, Economy
A trader works on the floor of the New York Stock Exchange. Photographer: Ramin Talaie/Bloomberg
Aug. 27 (Bloomberg) -- Bloomberg's Courtney Donohoe reports on the performance of the U.S. equity market today. U.S. stocks rose, paring the market’s third straight weekly loss, as Federal Reserve Chairman Ben S. Bernanke vowed to safeguard the recovery and growth in gross domestic product slowed less than estimated. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
Aug. 27 (Bloomberg) -- John O'Donoghue, head of equities at Cowen & Co. LLC, talks about the outlook for Federal Reserve monetary policy. Cowen also discusses U.S. stocks, investor sentiment and his investment strategy. He talks with Matt Miller, Dominic Chu and Adam Johnson on Bloomberg Television's "Street Smart." Richard Regan of ProTradingCourse.com also speaks. (Source: Bloomberg)
Stocks and commodities surged while Treasuries retreated after Federal Reserve Chairman Ben S. Bernanke pledged to safeguard the recovery and economic growth slowed less than estimated in the second quarter.
The Standard & Poor’s 500 Index rose 1.7 percent to 1,064.59 at the 4 p.m. close in New York, paring its third straight weekly decline to less than 0.7 percent. Ten-year Treasury yields, which slid to a 17-month low this week, surged 17 basis points to 2.65 percent. Oil rose for a third day, helping send the Reuters/Jefferies CRB Index of commodities up 1.2 percent. The yen weakened against all 16 major counterparts as Japanese Prime Minister Naoto Kan planned to stem its rally.
Bernanke said the U.S. central bank will do all that it can to ensure a continuation of the recovery, including “unconventional measures.” The 1.6 percent growth in U.S. gross domestic product in the second quarter surpassed the median economist estimate in a Bloomberg survey and tempered concern the economy will relapse into recession.
“We got a positive vibe from Bernanke’s text which, combined with indications that the market was oversold, is helping equities today,” said John Lynch, chief equity strategist at the Wells Fargo Funds Management division of San Francisco-based Wells Fargo & Co. that oversees $465 billion.
Rebound From 7-Week Low
The S&P 500 rebounded from a seven-week low as all 10 industry groups advanced. DuPont Co., Alcoa Inc. and Caterpillar Inc. rose at least 3.1 percent to lead the Dow Jones Industrial Average back above 10,000 after the 30-stock gauge closed below that level yesterday for the first time since July 6.
Growth in the world’s largest economy from April to June cooled from the 2.4 percent pace projected last month.
The Fed chairman in a detailed analysis of the economy said growth during the past year has been “too slow” and unemployment “too high.” Still, he said a handoff from fiscal stimulus and inventory re-stocking to consumer spending and business investment “appears to be underway.” He also said that the “preconditions” for growth in 2011 are “in place.”
“The Committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly,” the Fed chairman said today in opening remarks to central bankers from around the world at the Kansas City Fed’s annual monetary symposium held in Jackson Hole, Wyoming.
European Stocks
Almost four shares rose for each that fell on the Stoxx Europe 600 Index, which climbed 0.6 percent to trim its loss for the week to 0.4 percent. Royal Vopak NV, the world’s largest chemical and oil storage company, rallied 7.3 percent after raising its profit outlook.
European Aeronautic Defence & Space Co. slid 3.2 percent after a report that Airbus SAS reduced its production targets for the A350 airliner. Banca Popolare di Milano Scrl tumbled 4.5 percent after earnings missed estimates.
The MSCI Asia Pacific Index gained 0.3 percent. Fairfax Media Ltd., Australia’s second-largest newspaper publisher, jumped 4.4 percent and Industrial & Commercial Bank of China Ltd. climbed 1.3 percent as earnings beat forecasts.
German 30-year bond yields rose 3 basis points to 2.69 percent after Bernanke’s speech, having earlier touched a record low 2.623 percent.
The yen stayed lower against the dollar and the euro after Kan said he wants the Bank of Japan to implement monetary policy “swiftly.” The yen was 1.1 percent weaker at 85.35 per dollar and slipped 1.2 percent to 108.64 per euro. The dollar fell 0.1 percent against the European currency to $1.2733.
‘Likely to Disappoint’
“The announcement by the government is highly likely to disappoint,” Derek Halpenny, European head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in a report. “The reality is that global yield declines are playing a key role in yen gains and in that sense a change in international conditions is required.”
Oil rose 2.5 percent to $75.17 after falling as much as 1.8 percent. Nickel, copper, lead and zinc climbed more than 2 percent lead gains on the London Metal Exchange.
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