S&P 500 rises to record

May 27, 2014 06:34 AM

The Standard & Poor’s 500 Index (CME:SPM14) climbed to an all-time high as data showing increases in durable-goods orders and consumer confidence boosted optimism in the world’s largest economy. Emerging-market stocks retreated while gold (COMEX:GCM14) and grains declined.

The S&P 500 rose 0.4% to a record 1,908.82 at 10:07 a.m. in New York, and the Russell 2000 Index of smaller companies added 1%. The Stoxx Europe 600 index climbed 0.3%. The Morgan Stanley Capital International Emerging Markets Index lost 0.6% as Russia’s Micex dropped 2.5%. The yield on 10-year Treasuries increased 1 basis point to 2.55%. Portugal’s 10-year yield fell three basis points. Wheat (CBOT:WN14) declined 0.9% and corn (CBOT:CN14) slid 0.9%. Gold tumbled 1.3% to a three-week low.

U.S. durable goods orders rose for a third month in April, a sign factories will help the economy strengthen. Other data showed consumer confidence increased in May, while home prices in 20 U.S. cities rose at a slower pace in the year ended in March. European Central Bank President Mario Draghi signaled yesterday a readiness to act on low inflation, while China’s premier said he may fine-tune economic policy.

“We had some weak U.S. data due to the harsh winter and now everyone is expecting a recovery in spring and summer,” said Raimund Saxinger, a fund manager at Frankfurt-Trust Investment GmbH, which oversees about $22 billion of assets.

Bookings for goods meant to last at least three years rose 0.8% after a 3.6% gain in the prior month that was stronger than previously reported, Commerce Department figures showed today in Washington. The median forecast of 68 economists surveyed by Bloomberg called for a 0.7% drop. Orders for military hardware surged by the most since December 2012.

Economic Data

The Conference Board’s index of U.S. consumer confidence increased to 83 in May from 81.7 a month earlier, the New York- based private research group said today. A Markit Economics preliminary index for services unexpectedly rose to 58.4 this month from 55.

The S&P/Case-Shiller index of property values increased 12.4% from March 2013, the smallest 12-month gain since July, after rising 12.9% in the year ended in February, a report from the group showed today in New York.

The S&P 500 rose 1.2% last week to a record amid better-than-estimated economic data, while the Russell 2000 Index of small companies increased 2.1%, ending a two- week slide.

The benchmark equities gauge is trading at 16.1 times the average projected earnings of its members, up from a multiple of 14.8 on Feb. 3, according to data compiled by Bloomberg. A gauge of U.S. equity volatility known as the VIX dropped 8.7% last week to 11.36, its lowest level since March 2013. The Chicago Board Options Exchange Volatility Index has retreated 47% from a 13-month high in February.

Volatility Gauge

Traders are loading up on VIX call options as history shows there’s a good chance stock-market volatility is about to increase. Calls on the measure, which become more valuable during times of market stress, outnumbered ones betting on a decrease in market swings by 3.4-to-1 this month, the most since 2008, data compiled by Bloomberg show. The index has closed below 15 for the past 27 days. A study from Sundial Capital Research Inc. shows the gauge usually rises after reaching such low levels.

The value of equities worldwide climbed to a record $63.8 trillion yesterday, a public holiday in the U.S. and U.K.

The MSCI All-Country World Index climbed for a fifth day, gaining 0.2% to the highest level since November 2007. The MSCI AC Asia Pacific Index slipped less than 0.2% after gaining 0.4% yesterday for a third day of increases.

European Stocks

The Stoxx 600 gained 0.3% today, after a 0.6% advance yesterday as Prime Minister Matteo Renzi’s party beat a populist challenger in European Parliament elections.

Accor SA rose 0.9% today after Europe’s largest hotel operator agreed to buy hotels in Germany and the Netherlands for about 900 million euros ($1.23 billion). InterContinental Hotels Group Plc rallied 4.2% after a report that it rejected a takeover bid from the U.S. Exane BNP Paribas said the report may spark mergers and acquisitions in the industry.

Aveva, AstraZeneca

Aveva Group Plc jumped 9.7% after the U.K. maker of computer software reported profit that beat analysts’ estimates. AstraZeneca Plc fell 2.5% after Pfizer Inc. abandoned its effort to buy the U.K. drugmaker.

The emerging markets MSCI index is headed for its fourth monthly increase, the longest streak since December 2009.

Russia’s Micex Index dropped from the highest level since President Vladimir Putin’s incursion into Crimea. The ruble (CME:R6M14) weakened for a second day, losing 0.4% against the dollar. Ukraine’s hryvnia strengthened 0.1%.

Ukraine’s President-elect Petro Poroshenko pledged to rein in separatists in the east of the country, setting the country on a collision course with Russia.

‘Colossal Mistake’

“There will be a sharp increase in the efficiency of anti-terrorist operations,” Poroshenko said in Kiev yesterday. In Moscow, Foreign Minister Sergei Lavrov said that any escalation would be a “colossal mistake.”

India’s Sensex lost 0.7%, dropping from a record close yesterday when its 14-day relative strength index reached 82. Some investors see readings above 70 as a signal to sell. The Sensex climbed 9.5% in May, its biggest monthly advance since January 2012. Narendra Modi, who was sworn in as prime minister yesterday, reduced India’s cabinet to the smallest size in 16 years in what he called an “unprecedented” overhaul.

Portuguese bonds led gains in the euro region’s peripheral market today amid speculation the ECB is preparing to introduce further stimulus measures at a meeting next week. Ninety% of economists in a Bloomberg Monthly Survey predicted the central bank will ease monetary policy in June.

Portugal’s 10-year yield fell three basis points to 3.64% and the rate on similar-maturity Irish bonds dropped two basis points to 2.67%.

Corn weakened on speculation U.S. farmers accelerated planting, with the U.S. Department of Agriculture scheduled to update progress today. Wheat declined to an 11-week low. Gold dropped 1.3% to $1,275.40 an ounce.

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