U.S. Stocks Halt 3-Day Drop as Dollar, Gold Climb: Markets Wrap

(Bloomberg) -- U.S. stocks rose with the dollar as economic data bolstered confidence that the American economy is poised to accelerate. Gold rose and Treasuries erased losses as a slide in the price of crude sparked demand for haven assets..

The S&P 500 Index started the year with its biggest gain in four weeks, while the dollar jumped to the highest level in 14 years as U.S. manufacturing expanded. Oil fell more than $2 a barrel from the highest level in 18 months. European equities entered a bull market as the pace of German inflation doubled last month. Mexico’s peso slid after Ford Motor Co. canceled a $1.6 billion investment in the country. U.S. natural gas futures sank the most in 14 months.

The post-election rallies in riskier assets resumed after a holiday break, as readings on manufacturing in China, inflation in Germany and factory output in the U.S. bolstered optimism that growth is poised to accelerate. Byron Wien, the vice president of multi-asset investing at Blackstone Group LP, predicted the S&P 500 will surge 12 percent this year as economic growth gathers momentum.

The advance that started in Asia and spread to Europe faded somewhat during U.S. hours amid warnings that President-elect Donald Trump’s policies might have unintended consequences for the world’s largest economy. Lawrence Summers cited the possibility of protectionist measures as well as changes to foreign policy among issues that are creating “extraordinary uncertainty.” Analysts at Eurasia Group said Trump policies could contribute to a level of global instability not seen since World War II. Morgan Stanley suggested the best-ever rally for a president elect would end by inauguration day.

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Stocks

• The S&P 500 Index added 0.8 percent to 2,257.16 at 4 p.m. in New York, to halt its first three-day slide since the election. Phone and health-care shares led gains. The index finished 2016 with an advance of 9.5 percent.
• The Dow Jones Industrial Average climbed 115.77 points to 19,878.37, the most since Dec. 9.
• Ford rose 3.8 percent, most since Dec. 7, after saying it wouldn’t build a new plant in Mexico amid criticism from Trump.
• The Stoxx Europe 600 Index rose 0.7 percent to cap a 20 percent advance from its February 2016 low that meets the definition of a bull market.

Bonds

• Treasuries all but erased the biggest intraday decline since the Federal Reserve raised interest rates last month, as plunging crude oil prices spurred demand for haven assets. The 10-year yield was little changed at 2.45 percent after earlier topping 2.5 percent.
• German bonds fell as data showed inflation accelerated to the fastest rate since 2013. The yield on the nation’s 10-year securities dropped to the lowest level since November on Monday.

Commodities

• Crude oil fell 2.6 percent to close at $52.33 a barrel in New York after touching the highest level since July 6, 2015 at more than $55. Futures rose 45 percent last year.
• U.S. natural gas futures plunged 11 percent on forecasts for milder weather later in January, to settle at $3.327 per million British thermal units in New York.
• Gold futures jumped 0.8 percent to $1,160.60 an ounce in New York.
• The stronger U.S. dollar led to a drop in industrial metals. Zinc led declines with a 2.1 percent slide.

Currencies

• The U.S. Dollar Index increased 0.5 percent and earlier touched its highest level since December 2002.
• The yen slid 0.1 percent to 117.65 per dollar, paring losses that took it over 118. The euro traded down 0.5 percent to $1.0407.
• Turkey’s lira weakened the most among major world currencies on Tuesday, falling as much as 1.7 percent to a new record.

--With assistance from Neil Denslow David Goodman Namitha Jagadeesh Eddie van der Walt and Rainer Buergin To contact the reporter on this story: Jeremy Herron in New York at jherron8@bloomberg.net. To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Samuel Potter