U.S. Stocks Rise, Gold Sinks on GDP Report; Oil Declines
San Francisco (Oct 30) U.S. stocks rose, sending major indexes higher for the month, while gold sank after data showed the U.S. economy expanded more than forecast. Oil slid as the Federal Reserve ended its bond buying and U.S. production surged to the highest level since the 1980s.
The Standard & Poor’s 500 Index rose 0.4 percent at 3:09 p.m. in New York, paring an earlier gain of 0.9 percent. The Dow Jones Industrial Average (INDU) surged 1.5 percent as Visa Inc. (V) rallied the most in three years. The yield on 10-year Treasuries (USGG10YR) was little changed at 2.30 percent. The Stoxx Europe 600 Index rose 0.6 percent to erase earlier losses. Gold fell below $1,200 an ounce and silver tumbled to a 55-month low. The ruble surged the most since at least 2003 against the dollar.
The economy in the U.S. expanded more than forecast in the third quarter, capping its strongest six months in more than a decade, while separate data showed fewer Americans filed applications for unemployment benefits over the past month than at any time in more than 14 years. The unexpected decline in German inflation last month renewed concerns that Europe will slip into a recession just as Fed bond buying ends. Similar worries sent the S&P 500 down 7.4 percent from an all-time high in mid-September.
“Job growth has picked up and the GDP report was a little stronger than consensus,” Bob Doll, chief equity strategist at Nuveen Asset Management, said by phone. “That buttresses the view that the economy’s getting a little better, so stocks will continue to grind their way higher. It’s now about the economy and earnings, we’ve all overanalyzed the Fed to death.”
U.S. Growth
The S&P 500 slid 0.1 percent yesterday after the Fed ended its quantitative easing program. Officials said labor market conditions “improved somewhat further,” and that a range of indicators suggests that “underutilization of labor resources is gradually diminishing.” The central bank reiterated its commitment to keep interest rates low for a considerable time.
Visa rallied 11 percent, the most since 2011, and MasterCard Inc. added 9 percent as the two largest U.S. payment networks reported results that topped estimates.
About 80 percent of S&P 500 companies that have posted quarterly earnings this season have topped analysts’ estimates for profit, while 60 percent beat sales projections, data compiled by Bloomberg show.
Energy producers in the S&P 500 led declines today as oil resumed a selloff. Avon Products Inc. plunged 10 percent as revenue fell short of forecasts.
Price Weighting
The Dow average climbed 182.58 points to 17,156.89, the highest in a month. The gauge came within 70 points of a record close. Visa trades above $200 a share, giving it the biggest weighting in the 30-member index that ranks stocks by price rather than market capitalization. It has the 16th largest weighting in the S&P 500.
“The price-weighting thing is kind of strange,” Bob Landry, a portfolio manager who helps oversee $22.3 billion at USAA Investment Management Co. in San Antonio, said by phone. “It’s an index that’s been in existence for so long and a staple of the industry, but when I talk about the market I talk about the S&P.”
The computer system that carries prices for thousands of equities listed on the New York Stock Exchange malfunctioned today, sowing confusion among traders. The issue was later resolved.
The Bloomberg Dollar Spot Index fluctuated near a three-week high, as central banks around the world give investors the green light to buy the U.S. currency.
The greenback rose 0.1 percent to $1.2615 per euro after appreciating to $1.2548, the strongest level since Oct. 6. The shared currency is set for its biggest annual drop since 2005.
The dollar traded at 109.11 yen, a three-week high. Japan’s currency was unchanged at 137.55 per euro.
Deflation Watch
Lower-than-expected inflation in Germany may not bode well for the euro area, where price gains have been less than the European Central Bank’s goal. Data tomorrow will show euro-area consumer prices rose 0.4 percent this month from a year earlier, according to a separate survey of analysts.
“Most of the data over the last month has been net negative coming out of Germany, and this is just another example of that,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “Europe in general remains a headwind.”
Greek bonds fell, sending the 10-year yield 48 basis points higher, after Minister of Administrative Reform Kyriakos Mitsotakis said investors face a rollercoaster ride as the government tries to contain the risk of snap elections.
The Stoxx 600 erased an earlier drop of 1.1 percent, as 16 of the 19 main groups advanced. European shares have fallen 5.3 percent since a September high as concern increased that European Central Bank stimulus measures won’t be enough to spur growth, while China’s economy is slowing.
Commodity Rout
The Bloomberg Commodity Index sank 1 percent as gold tumbled 2.1 percent to $1,199.60 an ounce, to the lowest since Oct. 6. Silver futures for delivery in December plunged 5 percent to $16.41 an ounce. A close at that price would mark the biggest drop since Dec. 19.
“Gold dipped further on the stronger-than-expected GDP print and weekly claims” for jobless benefits, Tai Wong, the director of commodity product trading at BMO Capital Markets Corp. in New York, said in a telephone interview. “The market was already under pressure as the Fed ended the QE, and there are no worries about inflation.”
West Texas Intermediate crude fell 1.6 percent, retreating from a one-week high after U.S. crude production surged to the highest level since the 1980s. Brent futures slid 1.4 percent.
The Russian ruble jumped as much as 5.1 percent to 41.0005 per dollar, the biggest increase on record, according to Moscow Exchange data. It traded 3.4 percent higher at 41.7900. The currency slid 5.2 percent over the previous six days, even as the central bank ramped up interventions to slow its decline.
Source: Bloomberg
