Dec. 31 (Bloomberg) -- Stocks rose, capping the best yearly gain for the Standard & Poor’s 500 Index since 1997, and Treasuries dropped as data on consumer confidence and home prices topped economists’ estimates. The yen headed for the biggest annual drop versus the dollar since 1979.
The S&P 500 increased 0.4 percent to a record 1,848.36, bringing its yearly gain to 30 percent. Volume for U.S. stocks was about 25 percent below the three-month average as trading slowed before the New Year’s holiday. Ten-year Treasury yields reached a two-year high above 3 percent. The yen fell versus the dollar and touched its weakest level since 2008 yesterday. Natural gas and coffee sank more than 3 percent to lead commodities lower.
This year’s rally in stocks has sent the S&P 500’s valuation up more than 20 percent to 17.4 times reported earnings, the highest since 2010. The Conference Board’s index of U.S. consumer confidence rose to 78.1 in December from 72 in the prior month while the S&P/Case-Shiller index showed property prices in 20 cities rose in October from a year ago by the most in more than seven years.
“I don’t think the market is overvalued, but will it continue this nice smooth ascent with almost no volatility?” Tobias Levkovich, chief U.S. equity strategist at Citigroup Inc., said on Bloomberg Television’s “In the Loop with Betty Liu” program. “We will see a more volatile year that might scare off some investors, which might be good. Sentiment is getting way too positive. It’s beyond complacency. Right now, we’ve seen them get carried away and there could be some backup in the first half of 2014.”
Asset purchases by the Bank of Japan and the Federal Reserve have supported the global economy and helped to increase the market value of world stocks by $9.5 trillion this year.
The Chicago Board Options Exchange Volatility Index, derived from the price of contracts used to protect against share declines, retreated 24 percent this year for its biggest decrease since 2009. The gauge averaged about 14.2, the lowest reading since 2006, data compiled by Bloomberg show. It closed below its historic mean of 20.20 on all but two days of the year.
The U.S. will have a full day of equity trading today and be closed tomorrow. The S&P 500 has rallied 2.4 percent in December and posted gains in every month this year except August and June. The MSCI All-Country World Index of stocks in developed and emerging markets has jumped 20 percent this year, its biggest annual advance since 2009.
The S&P 500 ended the year at an all-time high for the first time since 1999, when it rose 20 percent to a record 1,469.25, according to data compiled by Bloomberg.
Among stocks moving in the U.S. today, Hertz Global Holdings Inc. gained 10 percent after the largest publicly traded U.S rental-car company said it adopted a so-called poison pill upon seeing “unusual and substantial activity” in its stock. Marvell Technology Group Ltd. jumped 4.5 percent after KKR Fund Holdings disclosed a 6.8 percent stake in the chipmaker.
Energy refining companies Marathon Petroleum Corp., Valero Energy Corp., Phillips 66 and Tesoro Corp. rose at least 3 percent for the biggest gains in S&P 500. Berkshire Hathaway Inc. will swap about $1.4 billion in shares of Phillips 66 for full ownership of the energy firm’s pipeline-services business as billionaire Warren Buffett expands his bet on oil transportation.
U.S. gasoline production jumped 4.3 percent to 9.72 million barrels a day in the week ended Dec. 20, the most in weekly data going back to 1982, the Energy Information Administration reported on Dec. 27. Refiners have ramped up operations to benefit from a flood of less-expensive domestic crude as U.S. oil output reached the highest level in 25 years.
All 10 of the main industries in the S&P 500 advanced this year, led by gains of at least 37 percent in industrial, health- care and consumer-discretionary companies. About 460 stocks in the index were up for the year, the broadest rally in data going back to 1990.
Telecommunications companies rose 6.5 percent this year, the smallest gain among 10 industries in the S&P 500. The increase is the best for the worst-performing group since 1995, data compiled by Bloomberg show.
Real-estate companies and travel and leisure stocks led gains by European equities on lower-than-average volume. Equity markets in France, Belgium, Spain, Portugal and the Netherlands close at 1 p.m. The U.K.’s FTSE 100 Index added 0.3 percent in a half day of trading. Exchanges in Germany, Switzerland, Italy and the Nordic countries have already closed for the year. Russia, Hungary, Poland, the Czech Republic and Ukraine also ended 2013 trading yesterday.
The pound strengthened for a fourth day against the dollar. Sterling has gained versus 13 of its 16 major counterparts in 2013.
The MSCI Emerging-Market Index was little changed and is down 5 percent in 2013.
The MSCI Asia Pacific Excluding Japan Index added 0.2 percent today, led by Chinese shares after the nation’s regulator approved the first initial public offerings in more than a year.
The S&P GSCI gauge of 24 commodities has slipped 2.2 percent this year, on course for its first annual retreat since 2008. Corn has slumped 40 percent in 2013, its biggest drop since at least 1960. Gold has plunged 28 percent this year, its first annual decline in 13 years. U.S. natural gas led gains by commodities this year, rallying 26 percent.
West Texas Intermediate oil fell 0.9 percent to $98.42 a barrel today, capping an annual gain of 7.2 percent. Crude declined 7.1 percent in 2012. Natural gas slumped in New York as forecasts for moderating cold signaled reduced demand for heating fuels after frigid weather this week.
U.S. government securities posted the first annual loss since 2009 amid signs the recovery of the world’s biggest economy will prove resilient to the reduction of Federal Reserve bond purchases. Ten-year yields have jumped 1.27 percentage points this year and will increase to 3.4 percent by the end of next year, according to the median estimate of analysts surveyed by Bloomberg.
Yields in the six major government bond markets from the U.S. to Germany and Japan are forecast to rise next year with world economic growth poised to accelerate to 2.8 percent in 2014 from 1.98 percent this year, according to Bloomberg surveys of economists. Fed policy makers decided this month to begin cutting the $85 billion they were pumping into the U.S. financial system each month through bond purchases.
--With assistance from Emma O’Brien in Wellington, Claudia Carpenter, Matthew Brown, Nicholas Reynolds, Shelley Smith and Jennifer Joan Lee in London, Callie Bost, Mary Childs, David Marino and Whitney Kisling in New York and Glenys Sim in Singapore. Editors: Michael P. Regan, Lynn Thomasson