S&P 500 Caps Best 5 Days Since 2011 as Oil Jumps: Markets Wrap

(Bloomberg) -- U.S. stocks capped their best five-day run since 2011, extending a global rally as equities rebounded from the worst of this month’s correction. The dollar slumped to a three-year low and oil rallied.

The S&P 500 topped the 2,700 level and the Dow Jones Industrial Average climbed above 25,000 following gains in Europe and Asia. The yield on 10-year Treasuries hovered near 2.9 percent. The yen ascended to a 15-month high, while South Africa’s rand traded at its strongest level in almost three years after President Jacob Zuma resigned.

Stock investors brushed off a report on U.S. wholesale prices that underscored signs of stronger inflation even as a growing number of economists now expect the Federal Reserve to step up the pace of its interest-rate increases this year. A report yesterday showing faster consumer-price increases gave rise to debate on the breakdown in the greenback’s correlation to interest rates, as currency investors focused instead on the U.S.’s twin deficits.

The S&P 500 closed at a two-week high and above its 50-day moving average after climbing 5.8 percent in the past five days. Equities remain cheap relative to bonds and won’t be affected by higher long-term interest rates as long as the 10-year Treasury yield stays below 4 percent, according to Gina Martin Adams and Peter Chung, equity strategists at Bloomberg Intelligence.

“The market is figuring out that 3 percent is digestible on the 10-year yield,” said Leo Grohowski, the chief investment officer of BNY Mellon Wealth Management. “As long as the reason you’re getting to the 3 percent level is driven by a better feeling about economic growth, which therefore leads to a better feeling about corporate profits. And that’s what I sense taking place.”

Japan’s Finance Minister Taro Aso’s comments that the yen’s gain isn’t abrupt enough to require intervention supported the Japanese currency’s rally. Hong Kong equities sealed their best three-day run in more than two years in shortened trading ahead of the Lunar New Year holiday. China, South Korea, Taiwan, Vietnam markets are closed Thursday.

Terminal users can read more in our markets blog.

Here are some important things to watch out for this week:

• A handful of European Central Bank officials are due to speak Friday.
• Earnings season continues in full swing.
• Lunar New Year celebrations for the Year of the Dog begin, affecting China, Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21.

These are the main moves in markets:

Stocks

• The S&P 500 rose 1.2 percent at the close of trading in New York.
• The Stoxx Europe 600 Index climbed 0.5 percent.
• The MSCI All-Country World Index advanced 1.3 percent.

Currencies

• The Bloomberg Dollar Spot Index declined 0.5 percent to a three-year low.
• The euro gained 0.4 percent to $1.2507, reaching the strongest in two weeks.
• The Japanese yen climbed 0.9 percent to 106.05 per dollar.
• South Africa’s rand advanced 0.7 percent to 11.6314 per dollar.

Bonds

• The yield on 10-year Treasuries was little changed at 2.9 percent, near the highest in more than four years.
• Germany’s 10-year yield rose one basis point to 0.76 percent.

Commodities

• West Texas Intermediate crude rose 1.7 percent to $61.61 a barrel.
• Gold rose 0.3 percent to $1,354.26 an ounce.
• Copper futures rose 0.4 percent.

--With assistance from Adam Haigh Nancy Moran Natasha Doff Todd White and Christopher Anstey

To contact the reporter on this story: Kailey Leinz in New York at kleinz1@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Brendan Walsh

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