US stocks rallied, capping the first three-month gain for the Standard
& Poor's 500 Index since its record in 2007, as commodity,
transportation and financial shares jumped on speculation the global
economy is recovering.
Freeport-McMoRan Copper & Gold, CSX and Capital One Financial
climbed at least 4 per cent. Raw-material producers led the gains as
the Reuters/Jefferies CRB Index of 19 commodities extended its rise
this month to 14 per cent, its best advance since 1974. Treasuries
pared a weekly drop, while the US dollar weakened below $US1.41 a euro
for the first time this year.
The Standard & Poor's 500 Index added 1.4 per cent to 919.14 in New
York, with almost all of the advance coming after 3:30 p.m. as
investors snapped up shares in the final minutes of May's 5.2 per cent
gain.
The Dow Jones Industrial Average rose 96.53 points, or 1.2 per cent, to 8,500.33. The Nasdaq Composite Index rose 22.54 points, or 1.29 percent, to 1,774.33. Three stocks climbed for each falling on the New York Stock Exchange.
Australian stocks are also poised for gains when markets resume trading on Monday. The SPI 200 futures ended Saturday trading up 46 points to 3845, ABC radio reported. The Australian dollar also extended its surge, ending the trading week at 80.1 US cents.
''We continue to see reports globally that things are getting better
economically,'' said James Paulsen, chief investment strategist at
Wells Capital Management. ''Basic materials and raw- materials stocks
continue to move higher, driven by a weaker US dollar.'' The jump in
the final half-hour was ''sort of window dressing at the end of the
month,'' he said.
Benchmark indexes were whipsawed earlier as a gauge of business
activity near Chicago unexpectedly decreased. Then, the
Reuters/University of Michigan index of consumer confidence for May
came in slightly better than forecast at 68.7.
Stocks in Asia and Europe rallied after reports showed industrial
production in Japan increased the most since 1953 while India's economy
expanded faster than economists estimated. That drove commodities
prices higher while weakening the dollar.
Commodities rally
A gauge of 28 raw-materials producers rose 3 per cent for the biggest
gain in the S&P 500 among 10 industry groups. Copper advanced in
London and New York, capping a fifth straight monthly gain, as an
improving economic outlook and a weaker dollar spurred demand.
Freeport-McMoRan, the world's largest publicly traded copper producer,
gained 4.3 per cent to $US54.43. Newmont Mining added 3.2 per cent to
$US48.87.
Chevron gained 1.3 per cent to $US66.67. Schlumberger, the biggest oilfield-services company, added 1.6 per cent to $US57.23.
'Economic rebound'
Burlington Northern Santa Fe and Union Pacific, the two biggest US
railroads, led a gauge of 10 transportation stocks 4.8 per cent higher
for the biggest gain in the S&P 500 among 24 industry groups. CSX
rallied 8 per cent to $US31.76.
''These transportation companies are going to start moving product
again,'' said Philip Orlando, chief equity strategist at Federated
Investors in New York. ''If we get an improvement in economic activity,
it means that we're going to start to see an increase in truck traffic,
in rail traffic, in air traffic. They will be shipping goods and
products across the world again.''
The Baltic Dry Index, which tracks transport costs on international
trade routes, added 4.2 per cent to 3,298 for its 19th straight
advance, the longest streak in two years.
The S&P 500 is up 1.8 per cent in 2009 after surging 36 per cent
from a 12-year low in March as reports signaled the global recession is
easing and about two-thirds of companies in the measure beat analysts'
estimates for the first three months of the year. It climbed 3.6 per
cent in this holiday-shortened week, and has advanced in 10 of the last
12 weeks.
The S&P 500 Financials Index of 80 banks, insurers and investment
firms rose 1.7 per cent, erasing an earlier 1.3 per cent drop.
Capital One Financial, the credit-card lender that received $US3.6
billion from the Treasury's rescue fund, rose 5 per cent to $US24.44.
Wells Fargo added 3 per cent to $US25.50.
VIX forecasts
The VIX, the benchmark gauge for US stock option prices and a barometer
of Wall Street uncertainty, is more likely to reach 40 than drop to 20,
investors said in a Macro Risk Advisors LLC survey.
Seventy-four per cent of the 100 investors and traders surveyed
yesterday said an increase to 40 is more probable for the Chicago Board
Options Exchange Volatility Index, Dean Curnutt, president of the New
York-based brokerage that specializes in equity options, wrote in a
note to clients. The rest believed a drop to 20 was more likely to
occur first.
The VIX, a measure of how much it costs to insure against losses by the
S&P 500, has averaged about 20 over its lifetime. It peaked at
80.86 in November, dipped below 30 in May for the first time in eight
months and slid 8.7 per cent to 28.92 today. The last close above 40
was in April, and the last time it was below 20 was Aug. 28.
Treasuries rebound
Treasuries rose for a second day as concern eased that the record pace
of US debt auctions will overwhelm demand after international investors
snapped up $US101 billion in notes sold this week. US 10- and 30-year
securities erased most of the losses they posted this week, pushing
their yields down from six-month highs.
Yields on Fannie Mae and Freddie Mac mortgage bonds tumbled, likely
pushing down interest rates on new home loans after a climb that added
to signs the housing market and economy may not soon recover.
The S&P 500 slid the most in two weeks on May 27 as a jump in
long-term borrowing costs spurred concern government efforts to reduce
interest rates will fail.
Bloomberg News
