Stocks Surge on Economic News

Stocks Surge on Economic News; Copper Hits Record

By Rita Nazareth and Inyoung Hwang -

Traders work on the floor of the New York Stock Exchange in New York. Photographer: Ramin Talaie/Bloomberg

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Feb. 1 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks rose, pushing the Dow Jones Industrial Average to its first close above 12,000 since June 2008, after American and Chinese manufacturing expanded and United Parcel Service Inc. beat analysts’ earnings estimates. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)

Stocks rose the most in two months, recouping losses from the Jan. 28 plunge driven by protests in Egypt, and Treasuries slumped as Chinese and U.S. manufacturing expanded and United Parcel Service Inc. beat earnings estimates. Copper climbed to a record as the dollar weakened.

The MSCI All-Country World Index of shares in 45 nations advanced 1.7 percent to 341.33 at 4:16 p.m. in New York. The Dow Jones Industrial Average closed above 12,000 for the first time since June 2008. Yields on 10-year U.S. Treasuries increased seven basis points to 3.44 percent. Copper rose 2 percent in New York. The Dollar Index slipped as much as 1 percent to a 12-week low of 76.943. Greek and Egyptian bonds surged.

The global stocks measure exceeded the more than two-year high reached on Jan. 27, before the biggest one-day slump since November amid intensifying protests in Egypt. Today’s data on increased manufacturing in the U.S. and China followed reports last week showing the fastest expansion in American business since 1988 and consumer spending that topped projections.

“The U.S. is exiting the recovering phase and moving towards long-term expansion,” said James Swanson, chief investment strategist at Boston-based MFS Investment Management, which oversees about $200 billion. “Last week, we saw in GDP numbers that consumer spending is pushing head. Today we confirmed the manufacturing sector is very strong.”

UPS, Pfizer

UPS, the world’s largest package-delivery company, gained 4.2 percent and reached the highest intraday price since April 2009. The company, considered a proxy for global growth, posted an increase in holiday shipments. Freeport-McMoRan Copper & Gold Inc. and Alcoa Inc. rose at least 4.5 percent after copper rallied. Grain producer Archer Daniels Midland Co. jumped 6.2 percent, crane maker Manitowoc Co. soared 27 percent and Pfizer Inc. climbed 5.5 percent after they beat profit estimates.

The S&P 500 has risen 4.1 percent this year, extending a 13 percent advance in 2010, on government measures to stimulate the economy and higher-than-estimated corporate profits. Earnings for S&P 500 companies rose 30 percent in 2010, the fastest growth since 1995, and will rally 15 percent this year, according to analyst forecasts. More than 74 percent of the 204 companies that reported earnings since Jan. 10 topped analysts’ projections, according to data compiled by Bloomberg.

The first trading day of the month, historically better than average for the U.S. stock market, has been particularly profitable in recent months. The biggest gains for the S&P 500 since July were 3 percent on Sept. 1, 2.2 percent on Aug. 2 and 2.2 percent on Dec. 1. The index jumped 1.1 percent on Jan. 3 and 1.7 percent today.

Beating Stocks

Commodities have beaten stocks for three months, the longest stretch since June 2008, after the Federal Reserve pledged to buy $600 billion of Treasuries and demand for clothes and food lifted cotton, cocoa and copper. Equities were poised to break the streak until Jan. 28, when concern Egyptian President Hosni Mubarak will be ousted sent the MSCI gauge to its biggest retreat since November and boosted food and fuel.

Today’s slump in Treasuries increased the difference between 2- and 30-year yields to an almost record high. The extra yield investors demand to hold 30-year bonds instead of 2- year notes touched 4.03 percentage points, compared with a record 4.04 percentage points set Jan. 28.

Copper rose to a record as expanding manufacturing in China added to signs of growth in industrial-metals demand. Aluminum and nickel climbed to two-year highs. Global economic growth of 4 percent this year and next will mean similar gains in industrial-metals demand for both years, led by aluminum and nickel, Credit Agricole SA said.

Copper, Aluminum

Copper futures for March delivery climbed to an all-time high of $4.551 a pound. On the London Metal Exchange, aluminum touched $2,570 a ton, the highest since September 2008, and nickel climbed to $28,120 a ton, the highest since May 2008.

The euro rose to a two-month high versus the dollar as people familiar with the situation said the European Financial Stability Facility may buy distressed government debt in private placements. Jordan’s dinar and Israel’s shekel gained versus the dollar on speculation Egyptian turmoil will be contained.

The dollar depreciated 1 percent to $1.3833 per euro after touching $1.3843, the weakest level since Nov. 9. The U.S. currency decreased 0.8 percent to 81.36 yen after touching 81.32, the lowest level since Jan. 3.

Greek bonds jumped, with the 10-year yield sliding 29 basis points to 10.93 percent, amid speculation the European Union and International Monetary Fund may agree on a plan to help Greece re-schedule loans it took as part of its bailout package.

‘All the Rhetoric’

“All the rhetoric in the past few days about the potential solutions to the European debt crisis and especially on the program of Greece, either through debt buybacks or an extension of the loan up to the 30-year sector, are helping peripherals and especially Greece at the moment,” said Ioannis Sokos, a strategist at BNP Paribas SA in London.

The difference in yield between 10-year Greek debt and European benchmark bunds narrowed 36 basis points to 7.83 percentage points. The cost of insuring the sovereign debt of Greece against default declined, dropping 33 basis points to 827, according to CMA prices for credit-default swaps.

The nation’s debt recorded its first gain in four months in January, handing investors a 3.8 percent return, even as most global investors in a Bloomberg poll predict the nation will default. It beat AAA rated German debt and French securities, which handed investors losses of 1.40 percent and 1.15 percent respectively, including reinvested interest.

Yields on Spanish 10-year securities fell 16 basis points to 5.21 percent, while equivalent-maturity Italian yields fell eight basis points to 4.65 percent.

Egypt’s bonds gained for the first time in six days and credit risk fell the most on record on speculation that the government will honor its debt payments even as protesters demand Mubarak’s resignation.

Egypt’s dollar bonds advanced 0.2 percent today after the notes tumbled 12 percent in January, the most since at least 2001, according to JPMorgan Chase & Co. The cost of protecting the country’s debt against default with credit-default swaps fell 70 basis points, the most ever, to 350, CMA prices show.