U.S. Stocks, Dollar Advance on Trade Data

By Stephen Kirkland and Rita Nazareth - 

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

 

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U.S. stocks rose for the first time in seven days and the Dollar Index climbed as the trade deficit narrowed amid record exports and the cheapest valuations in almost a year lured equity investors. The euro fell as traders reduced bets on the pace of interest-rate increases.
The S&P 500 advanced 0.7 percent to 1,288.16 at 11:11 a.m. in New York after six straight days of losses, its longest slump since February 2009. The Stoxx Europe 600 Index gained 1 percent. The Dollar Index rose 0.4 percent after falling as much as 0.3 percent. The euro depreciated against 13 of its 16 major counterparts. Crude oil rose 1.1 percent after OPEC failed to reach an agreement on production targets.
U.S. equities rebounded after the S&P 500 slumped 6.2 percent from an almost three-year high at the end of April through yesterday following disappointing data on jobs, manufacturing and consumer confidence. The slump left the index trading at 12.1 times forecast earnings for the next year, the cheapest since last summer, according to Bloomberg data.
“We’re due for a rally after miserable stock performance,” said John Carey, a Boston-based money manager at Pioneer Investments, which oversees about $250 billion. “People have been focusing on the negatives and have not been emphasizing the earnings momentum. Some stocks present good values again. It’s a good environment for investors to be positioning themselves.”

S&P 500 Rebound

The S&P 500 rebounded following a 4.9 percent slide over the previous six days. Earnings are forecast to grow 20 percent this year for S&P 500 companies on 9.8 percent revenue growth, according to data compiled by Bloomberg.
Producers of energy and raw materials helped lead gains among 10 groups in the S&P 500 today, rising 1 percent or more. Monsanto Co. climbed 2.7 percent and CF Industries Holdings Inc. rallied 4 percent to pace gains among agricultural stocks after the U.S. Department of Agriculture said the nation’s corn harvest may be 2.3 percent smaller than forecast in May because of excessive Midwest rains.
The U.S. trade gap shrank 6.7 percent to $43.7 billion, the lowest since December, Commerce Department figures showed. The gap was projected to widen to $48.8 billion from an initially reported $48.2 billion in March, according to the median forecast of 75 economists surveyed by Bloomberg. Exports increased 1.3 percent to $175.6 billion, boosted by sales of fuel oil, petroleum products and computers.

Jobless Claims

Stocks climbed even after U.S. initial jobless claims unexpectedly rose last week, increasing by 1,000 to 427,000 in the week ended June 4, according to figures from the Labor Department. Economists forecast a drop to 419,000, according to a Bloomberg survey.
The yield on the 30-year Treasury bond fell one basis point to 4.18 percent before the government sells $13 billion of the securities, the last of three auctions this week totaling $66 billion. The yield on the five-year Treasury note rose five basis points to 1.55 percent.
The Stoxx 600 also gained for the first time in seven days, led by basic-resource and chemical companies. Home Retail Group Plc plunged 14 percent after cutting its forecast for revenue at the Argos chain.
The euro weakened even as European Central Bank President Jean-Claude Trichet said “strong vigilance” is needed to contain inflation. The ECB left its main refinancing rate at 1.25 percent, matching expectations from all 52 economists surveyed by Bloomberg.

Inflation Forecast

The euro erased an earlier advance versus the dollar, Euribor futures rose and German government bonds fell after Trichet said the ECB hadn’t raised its 2012 inflation forecast from 1.7 percent, fueling speculation the bank won’t raise rates as quickly as previously expected.
Crude oil climbed 1.1 percent to $101.87 a barrel in New York. Corn futures for July delivery rose 11.5 cents, or 1.5 percent, to $7.7550 a bushel on the Chicago Board of Trade. Earlier, the price reached $7.93, the highest for a most-active contract since June 2008. Cotton, cocoa and coffee also rallied.
The extra yield investors demand to hold Greek 10-year bonds instead of benchmark German bunds increased 51 basis points, while the similar-maturity Portuguese-German spread widened to 725 basis points, the most since at least 1997, when Bloomberg began collecting the data.
Plan for Greece
European governments and the International Monetary Fund would lend as much as an extra 45 billion euros ($66 billion) to Greece under the latest plan to avoid the euro area’s first sovereign default, two people with direct knowledge of the talks said. European estimates put Greece’s 2012-14 financing gap at as much as 170 billion euros, the people said. It would be filled by the loans, plus around 57 billion euros in unspent aid from last year’s bailout, roughly 30 billion euros in asset-sale proceeds and about 30 billion euros in rollovers by creditors.
The MSCI Emerging Markets Index dropped 0.4 percent. The Shanghai Composite sank 1.7 percent amid speculation the central bank will keep tightening monetary policy. South Korea’s Kospi Index retreated 0.6 percent before tomorrow’s central bank rate decision.
The New Zealand dollar climbed 1.7 percent versus the yen after the central bank said commodity prices remain “very strong” and that borrowing costs will need to increase in the next two years.