U.S. Stocks Rise as Dollar Weakens With Emerging Market Assets
published May 2nd 2016, 3:00 pm, by Jeremy Herron and Joseph Ciolli
U.S. shares rose the most in two weeks and the dollar weakened to the lowest in almost a year as traders lowered expectations for higher interest rates as manufacturing slowed last month. Emerging-market assets retreated with crude.
The S&P 500 advanced as consumer and financial shares paced gains amid corporate results. The euro topped $1.15 for the first time since August, while gold pared an advance after climbing above $1,300 an ounce for the first time since January 2015. Oil fell below $45 a barrel in New York, after a 20 percent surge in April. Brazil’s real led losses among its major peers. The Treasury 10-year yield rose to 1.85 percent.
Global equities advanced on the first day of May, following a week that saw risk assets fall from favor amid speculation central banks from Asia to Europe won’t rush to add to unprecedented stimulus. The Federal Reserve struck a more hawkish tone with its policy statement even as signs mount that the rate of U.S. growth continues to slow. A weakening dollar helped boost commodities prices to the best month since 2010.
“We can hold the strength, but there’s still a lack of conviction in the market,” said Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates Inc. in Bethlehem, Pennsylvania. “Earnings have been spotty at best, and outlooks have given investors some pause about the future. At the same time, there are no signs pointing to a dramatic pullback.”
U.S. manufacturing expanded at a slower pace than forecast in April as factories continued to grapple with lax global demand and fallout from a weakened energy industry. China released an official manufacturing gauge over the weekend that added to evidence its economy is stabilizing, while manufacturing in the euro zone expanded at a faster pace than initially estimated in April. Markets shut for holidays included those of China, Hong Kong and the U.K.
The S&P 500 advanced 0.8 percent at 4 p.m. in New York, for its best gain since April 13. Amazon.com Inc. rose to a four-month high after earnings last week led to its biggest one-day gain in nine months. Wells Fargo & Co. and JPMorgan Chase & Co. climbed at least 1.1 percent. Halliburton Co. rallied 3.3 percent and Baker Hughes Inc. fell 1.6 percent after ditching their $28 billion merger. Apple Inc. extended its longest losing streak since 1998.
A rebound that lifted S&P 500 as much as 15 percent from its February low faltered last week amid lackluster earnings and few signs of a pickup in economic growth. The gauge reached a four-month high on April 20, within 1.3 percent of the record set last May.
Corporate results so far haven’t convinced investors that profits will rebound from what’s shaping up to be a fourth straight quarterly decline. Apple, Microsoft Corp. and Alphabet Inc. all forecast sales in coming periods below analyst estimates, sinking large-cap technology shares even as Facebook Inc. and Amazon.com Inc. have surpassed forecasts. Not all has been bad, as banks used cost cuts to top predictions. Financial shares advanced 0.9 percent Monday.
The MSCI Emerging Markets Index fell 0.5 percent, following two weeks of losses that pared its April gains. South Korea’s Kospi Index dropped for a fourth day and Indonesia Jakarta Composite Index slid to a three-week low, tracking losses in Japanese equities.
The yen has strengthened 13 percent this year, the best performance among Group-of-10 currencies. The euro advanced 0.6 percent to $1.1517, the highest since Aug. 25.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, headed for its lowest close in almost a year. It slumped 2 percent last week as the BOJ’s inaction coincided with Fed Chair Janet Yellen reiterating she’s in no rush to cool the U.S. economy by raising borrowing costs.
“So long as the Fed signals that they are being cautious in raising rates, real yields in the U.S. will decline, leading the dollar weaker,” said Hiromichi Shirakawa, the Swiss lender’s chief Japan economist and a former BOJ official. “The currency market is in a rather dangerous zone.”
Gold futures climbed as much as 1.1 percent to $1,304.30 an ounce, the highest since January 2015, before settling at $1,295.80.
Brent oil retreated 1.7 percent, following a 22 percent surge in April, as near-record Iraqi output added barrels to a worldwide supply glut. Gold climbed for a sixth day, the longest streak since March 2015. Brent crude fell to $46.53 a barrel.
The London Metal Exchange is shut Monday.
Treasury 10-year yields rose 2 basis points to 1.86 percent as trading resumed in New York after being closed for the London morning. The yield dropped five basis points last week. Puerto Rico, a U.S. territory, said Sunday that it will default on a $422 million bond payment for its Government Development Bank.
Canadian government bonds ended their worst month in a year as investors switched bets to central bank interest-rate increases from cuts on signs of economic strength and a crude-oil rally.
German’s 10-year bond yield fell one basis points to 0.27 percent, after three weeks of increases that pushed it to as high as 0.31 percent on April 27, the most in more than a month.