NEW YORK, Oct 19 — Stocks rose for a second day as energy companies surged with oil while corporate earnings boosted optimism on the economy. Treasuries fell.
American equities gained as Morgan Stanley reported better-than-estimated results, outweighing a disappointing forecast from Intel Corp. Oil extended gains in New York after the Energy Information Administration reported that US crude inventories fell last week. Treasuries dropped as investors focused on the prospects of an interest-rate increase in December, while awaiting the Federal Reserve’s Beige Book.
The earnings season is picking up pace amid a mood of political and economic uncertainty, with the next Fed meeting and the presidential election just three weeks away. Ahead of the third and final presidential debate tonight, a Bloomberg Politics national poll showed a nine-point lead for Democratic nominee Hillary Clinton over Republican Donald Trump. With investors seeking clues on the trajectory of US rates, they will watch closely the central bank’s survey of regional conditions this afternoon.
“The Fed is likely to raise rates in December and I don’t think that will happen sooner than that,” said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. “As you continue to get results the next two weeks, it’s going to be an accumulation. For the most part, the bigger financials with Goldman yesterday, Morgan Stanley today, and BofA earlier in the week — all of them posting pretty respectable numbers.”
Stocks
The S&P 500 Index rose 0.2 per cent to 2,142.93 as of 10:38am in New York, after rising the most in two weeks yesterday. Morgan Stanley added 1.5 per cent after joining a parade of banks whose profits were bolstered by bond-trading revenue. Intel slid 4.9 per cent. Halliburton Co. rose after posting a surprise profit.
“We did get a number of earnings so that will continue to be the focus,” said Yousef Abbasi, a global market strategist at JonesTrading Institutional Services LLC. “Maybe we could have some momentum behind financials today. It has been a market that has lacked leadership to a certain extent, so we’re looking to financials and energy.”
European stocks were little changed after their biggest gain in a month, with earnings reports taking a back seat as investors await tomorrow’s European Central Bank meeting for possible updates on the direction of monetary policy.
Shares of developing nations posted the biggest back-to-back gain in about four weeks after data showed China’s economy is stabilising.
Commodities
West Texas Intermediate for November delivery rose US$1.21 to US$51.50 a barrel on the New York Mercantile Exchange. Brent for December settlement climbed US$1.14 to US$52.82 a barrel on the London-based ICE Futures Europe Exchange.
The EIA reported a 5.25 million-barrel decline in nationwide crude supplies in the week ended October 14. Analysts surveyed by Bloomberg had forecast a 2.1 million-barrel increase and the American Petroleum Institute was said to report yesterday a 3.8 million-barrel drop. In Cushing, Oklahoma, the delivery point for US futures contracts, stockpiles fell 1.64 million barrels. Opec can continue to stabilise the market and other nations have given “strong signals” they will cooperate, Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih said in London.
“Any indication of a deal will add fuel to the bulls’ fire,” Tamas Varga, an analyst at PVM Oil Associates, said by phone. “I don’t think it is going to last for a long time, but at the moment the trend is up.”
Gold and silver advanced amid a decline in the dollar.
Currencies
The dollar fell for a third day against its peers after a core US inflation gauge rose less than forecast in September, suggesting the pace of interest-rate increases by the Fed will be gradual. The US currency dropped against most of its 16 major counterparts this week as the chances of a hike by December, according to fed fund futures pricing, receded amid mixed signals from the world’s largest economy.
The Bloomberg Dollar Spot Index, which measures the US currency against 10 major counterparts, dropped 0.1 per cent. It reached the highest level since March last week. The dollar was little changed at US$1.0969 per euro and weakened 0.4 per cent to 103.45 yen.
“When we start breaking these levels it’s natural to see a bit of a pause,” said Gavin Friend, a strategist at National Australia Bank Ltd. in London, referring to the seven-month high in the Bloomberg gauge. “It’s even more natural if you take the view that the Fed is signaling it wants to go in December, but there are members of the Fed that mean we actually can’t be sure of that.”
Elsewhere in the world, the ruble climbed as gains in the price of oil eclipsed investor concern the nation may face new sanctions over its role in Syria. China’s yuan halted this year’s longest run of losses. Brazil’s real gained even as policy makers are forecast to cut interest rates for the first time since 2012.
Bonds
Ten-year Treasury yields rose two basis points, or 0.02 percentage point, to 1.75 per cent, according to Bloomberg Bond Trader data. The yields slumped six basis points over the previous two days amid speculation that the Fed will tighten monetary policy at a gradual pace amid uneven growth in the world’s largest economy.
“The December hike is still very much on the agenda,” said Jan von Gerich, chief strategist at Nordea Bank AB in Helsinki. “Small downward surprises at this point probably mean they’ll proceed even more carefully longer out, but I think they’re quite keen on a December hike.”
Saudi Arabia plans to raise US$17.5 billion (RM73.7 billion) in the biggest ever bond sale from an emerging-market nation, according to four people with knowledge of the offering, as it seeks to shore up finances battered by the slide in oil. — Bloomberg
