Stocks Advance as Mubarak Resigns

Stocks Advance as Mubarak Resigns; Egypt Default Swaps Slide

By Michael P. Regan and Rita Nazareth

Traders work at the Frankfurt Stock Exchange in Frankfurt. Photographer: Hannelore Foerster/Bloomberg

Stocks rose, reversing an early drop, and the cost to insure Egyptian debt from default declined as the resignation of the nation’s President Hosni Mubarak and a jump in U.S. consumer confidence bolstered investor optimism.

The Standard & Poor’s 500 Index rose 0.4 percent to 1,326.52 at 1:31 p.m. in New York, erasing a 0.4 percent slide. An exchange-traded fund tracking Egyptian equities rallied 6.4 percent and the cost of credit-default swaps on the nation’s debt fell 24 basis points to 313, according to CMA. The Dollar Index climbed 0.4 percent and 10-year Treasury yields fell three basis points to 3.67 percent. Oil slid to a 10-week low.

Equities turned higher as Mubarak handed power to the military, bowing to demands of protesters who have occupied central Cairo for the past 18 days to demand an end to his 30- year rule. The resignation eased concern that tensions will spread throughout a region that holds more than 50 percent of the world’s oil reserves. Stocks began rebounding earlier as consumer sentiment climbed to an eight-month high.

“We should be able to forget about Egypt, at least in the near term, and focus on improving economic fundamentals,” said John Praveen, the Newark, New Jersey-based chief investment strategist at Prudential International Investments Advisers, which oversees $750 billion. “The consumer confidence report today was just one of a series of very positive figures that show that the recovery is on track. That should bring some short-term relief despite the uncertainties that we may still have about other governments in the Middle East and oil.”

Weekly Advance

The S&P 500 extended its weekly advance to 1.2 percent. Caterpillar Inc., JPMorgan Chase & Co. and Bank of America Corp. rose more than 2 percent for the top gains in the Dow Jones Industrial Average. ConcoPhillips rallied 2.2 percent after announcing plans to boost its dividend and buy back as much as $10 billion in shares.

The Thomson Reuters/University of Michigan preliminary consumer sentiment index climbed to 75.1 for February. The U.S. trade deficit widened 5.9 to $40.6 billion in December, in line with the $40.5 billion median forecast in a Bloomberg survey, as the cost of imported oil climbed, Commerce Department data showed.

The yield on Egypt’s dollar bonds due 2020 reversed gains after Mubarak’s resignation, down 16 basis points to 6.34 percent.

Global depositary receipts for Orascom Construction Industries, the country’s biggest publicly traded builder, reversed most of a 6.1 percent slide to close down 0.7 percent. The stock exchange in Cairo has been shut for two weeks amid the protests. Market Vectors Egypt Index ETF rallied 6.4 percent to $18.93, its biggest gain this year.

European Stocks

The Stoxx Europe 600 Index also erased earlier declines and rose 0.4 percent as auto companies and commodity producers rallied.

Michelin & Cie. climbed 3.7 percent as the world’s second- largest tiremaker announced that full-year profit exceeded analysts’ projections. Nokia Oyj tumbled 14 percent after announcing that it will make phones for Microsoft Corp.’s mobile operating system. L’Oreal SA sank 4.2 percent after the world’s largest cosmetics maker reported profit that failed to beat analysts’ estimates.

The MSCI Asia Pacific Index excluding Japan sank 0.8 percent. Newcrest Mining Ltd., Australia’s biggest gold producer, dropped 1.4 percent after first-half earnings missed estimates.

Dollar Gains

The dollar appreciated 0.6 percent against the euro and climbed 0.4 percent versus the yen. The Australian dollar fell below $1 versus the U.S. dollar for the first time in more than a week, depreciating 0.6 percent, after the country’s central bank Governor Glenn Stevens said policy makers judged it “sensible of late” to leave interest rates unchanged.

Crude for March delivery declined $1.36, or 1.6 percent, to $85.37 a barrel and touched $85.10, the lowest intraday price since Dec. 1.

Cotton futures surged to a record for a third straight day as increased exports from the U.S., the world’s largest shipper, signaled that global demand remains robust. Cotton for March delivery climbed 2.5 percent to $1.9231 a pound in New York and touched an all-time high of $1.9455.

U.S. Treasury Secretary Timothy Geithner today presented Congress with a set of options for weaning the $11 trillion mortgage market from its dependence on the government, while calling for changes to be phased in “responsibly and carefully” to avoid economic disruptions.

Spreads on Fannie Mae’s five-year unsecured debt fell 0.02 percentage point to 0.11 percentage point, down from 0.19 percent point on Feb. 3, as the proposal suggested shrinking the balance sheets of the companies and Federal Home Loan Bank system over time, reducing the supply of their borrowing.