May 30 (Bloomberg) -- U.S. stocks gained for a second week, capping the first three-month gain for the Standard & Poor’s 500 Index since its record in 2007, as commodities posted the biggest monthly rally since 1974 on bets that an economic recovery will boost demand for fuel, metals and crops. “The summer doldrums are being washed away by optimism that the economy didn’t slip into a permanent black hole,” said Diane Garnick, the New York-based investment strategist at Invesco Ltd., which oversees $348 billion. “Prices on inputs to business such as oil and natural resources are rising on the hopes of an economic turnaround.”
The S&P 500 climbed 3.6 percent to 919.14, rebounding from the prior week’s 5 percent loss that was the steepest since March. The benchmark equity index has rallied 36 percent from a 12-year low on March 9 and has advanced 1.8 percent in 2009, rebounding from a decline of as much as 25 percent. The Dow Jones Industrial Average added 223.01 points, 2.7 percent, to 8500.33. The Russell 2000 Index gained 3.1 percent. U.S. exchanges were closed May 25 for the Memorial Day holiday.
Commodities Rally
The Reuters/Jefferies CRB Index of 19 raw materials gained 14 percent in May, the most in almost 35 years. Oil climbed above $66 a barrel to a six-month high as the dollar declined beyond $1.41 against the euro for the first time this year, making raw materials such as oil and gold an attractive alternative investment. Gasoline soared 31 percent this month and gold, silver and copper surged, while corn and soybeans reached the highest in about seven months.
U.S. Steel Corp., the largest American steelmaker by 2008 sales, climbed 16 percent to $34.08 and Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, surged 13 percent to $54.43., leading gains among raw- materials companies.
‘Major Trade’
“People are banking on the next major trade in portfolios being the reflation trade,” evident in gains for energy and materials, said Michael Mullaney a Boston-based money manager at Fiduciary Trust Co., which oversees $9 billion.
The Conference Board’s consumer sentiment gauge climbed to 54.9 in May, topping economists’ estimates, as the stock market rally, low mortgage rates and smaller job losses brightened consumers’ outlook.
A separate report showed orders for durable goods, while lingering near a 13-year low, did increase more than forecast in April, adding to evidence that the recession is easing. A rebound in automobile orders and a jump in defense spending spurred the gain.
Steepest Yield Curve
The difference in yields between two- and 10-year debt climbed to a record this week on concern government efforts to reduce long-term borrowing costs will fail. The so-called yield curve steepened to 2.75 percentage points, surpassing the previous record of 2.74 percentage points set on Aug. 13, 2003.
Investors are selling long-term Treasuries as the government borrows record amounts of debt to fund bank bailouts, stimulus spending and a record budget deficit. Yields on 10-year notes rose more than 100 basis points since Federal Reserve officials said in March they would buy up to $300 billion of U.S. debt over six months to drive down consumer rates.
Unemployment probably increased to 9.2 percent in May, the highest since September 1983, underscoring forecasts that the economy will be slow to pull out of the worst recession in half a century, economists said before a report next week. Payrolls probably fell by 521,000 this month after declining by 539,000 in April, the survey showed. more...
To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.
I have been reading the reports written by Diane Garnick since 1996 when was at Merrill Lynch. She has always been very good. If she thinks this is over, the worst is probably really behind us.
BalasHapus