U.S. Stocks Rise on Small-Cap Rally; Oil Advances, Dollar Slips

May 19, 2014 4:22 pm ET

May 19 (Bloomberg) -- U.S. stocks rose, as small-cap and Internet shares extended advances on one of the slowest trading days of the year. The yen strengthened to a three-month high versus the dollar while oil touched a four-week high.

The Standard & Poor’s 500 Index added 0.4 percent at 4 p.m. in New York, following the gauge’s first back-to-back weekly losses since January. The Russell 2000 Index jumped 1 percent, for a second day of gains after a 3.3 percent drop. About 4.9 billion shares changed hands on U.S. exchanges today, about 25 percent below the three-month average. Japan’s currency advanced for a fourth day against the greenback. West Texas Intermediate oil rose as much as 1 percent on speculation crude inventories slipped.

Pandora Media Inc., TripAdvisor Inc. and Netflix Inc. increased more than 4.2 percent to pace gains in Internet stocks as the Nasdaq Composite Index added 0.9 percent. AT&T slid 1 percent after agreeing to buy DirecTV, the largest U.S. satellite-TV company, for $48.5 billion. Pfizer Inc. gained 0.6 percent after AstraZeneca Plc rejected its sweetened 69.4 billion-pound ($117 billion) offer as too low.

“It’s going to be a slow week, and a lack of negative news could be moving things higher until we get a directional push,” Bill Schultz, chief investment officer who oversees about $1.1 billion at McQueen Ball & Associates in Bethlehem, Pennsylvania, said in a phone interview. “We’re back to the riskier, more volatile assets leading the way.”

Broader Market

The S&P 500 retreated less than 0.1 percent last week amid reports that showed consumer confidence fell in May from a nine- month high, while industrial production unexpectedly declined last month. The benchmark index reached an all-time high of 1897.45 on May 13 before the selloff in small-cap stocks spread to the broader market. While the Russell 2000 has added 1.7 percent in the past two days, it remains 7.8 percent below its record from March.

Federal Reserve Chair Janet Yellen said last week the U.S. economy has further to go to achieve full health. The central bank will release on May 21 minutes from its latest meeting.

“We began the year with a market that’s nervous, peaking out to new highs, but still nervous,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., said by phone. Her firm oversees over $1 trillion in assets. “As we near end of QE, this market is getting more and more normal,” she said referring to the Fed’s bond-buying program known as quantitative easing. “Valuations are stabilizing and froth is getting burned off. Growth stocks were part of that froth.”

Yields, Dollar

Benchmark 10-year Treasury yields rose two basis points to 2.54 percent, based on Bloomberg Bond Trader data,reversing earlier declines that left the rate near the lowest level in six months before the Fed minutes.

The Bloomberg Dollar Spot Index fell less than 0.1 percent, as the yen strengthened 0.1 percent to 101.45 per dollar. Japan’s currency earlier reached 101.10, the strongest since Feb. 5, and was 0.1 percent higher per euro. Europe’s shared currency rose 0.2 percent to $1.3714 after falling to $1.3648 on May 15, the least since Feb. 27.

The S&P GSCI gauge of 24 commodities advanced 0.2 percent. Nickel jumped almost 5 percent as OAO GMK Norilsk Nickel, the world’s largest producer of refined metal, said the global market will swing to a deficit next year. Copper in London rose to a 10-week high.

WTI for June delivery increased 0.6 percent to $102.61 a barrel, the highest settlement since April 21. A Libyan military police chief said he disbanded parliament after a militia he backs stormed it yesterday.

Coffee Slips

Coffee for July deliver settled lower by 0.7 percent, the seventh straight decline and the longest slump for the most- active contract since Nov. 5.

The MSCI Emerging Markets Index added 0.4 percent, headed for the highest close since October.

The Shanghai Composite Index fell 1.1 percent to the lowest close since April 28. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong dropped 0.4 percent. Data yesterday showed China’s new-home prices rose in April in the fewest cities in a year and a half, while the central bank ordered banks to curb interbank lending.

Dubai’s benchmark index tumbled the most in almost nine months amid investor bets that gains related to the MSCI Inc. upgrade next month are overdone. The DFM General Index declined 5.5 percent, the most since Aug. 27, to 4,855.50 at the close. That made the gauge the worst performer among more than 90 benchmarks tracked by Bloomberg globally.

Europe Stocks

In Europe, the Stoxx 600 traded at 14.4 times estimated 12- month earnings at the end of last week, compared with a five- year average of 11.6, the data show.

Health-care stocks posted the biggest losses in the benchmark gauge followed by banks, while Ryanair Holdings Plc led travel and leisure shares higher. The broader gauge slipped even as two shares advanced for every one that declined.

“Risk sentiment around European assets is increasingly sending warnings signs,” said Witold Bahrke, who helps oversee $55 billion as a senior strategist at PFA Asset Management in Copenhagen. “Earnings have been coming in mixed. Valuation aspects are also a part of the tendency towards risk aversion.”

Deutsche Bank AG dropped 1.7 percent after Germany’s biggest bank sold about 60 million shares to the Qatari royal family as it announced plans to raise 8 billion euros ($11 billion) in its second-biggest capital increase.

Ryanair rose 11 percent after Europe’s biggest discount airline forecast a return to growth this year following its first profit decline in five years.

Ukraine Tension

Banca Monte dei Paschi di Siena SpA, which holds the highest amount of Italian sovereign debt relative to tangible equity, fell as much as 5 percent, while UniCredit SpA, the nation’s biggest bank, fell 1.5 percent.

In Russia, the Micex Index gained 1.6 percent, for the eighth gain in nine days. OAO Gazprom added 0.6 percent before a visit by President Vladimir Putin to China this week that may bring the gas monopoly a landmark deal.

Putin ordered troops near Ukraine’s border back to base, signaling a possible easing of tensions before presidential elections in six days. Ukraine’s benchmark equity gauge climbed 3.1 percent while the hryvnia was little changed.

--With assistance from Emma O’Brien in Wellington, Yoshiaki Nohara and Mariko Ishikawa in Tokyo, Cecile Vannucci, Paul Dobson, Claudia Carpenter and Stephen Kirkland in London and Nick Gentle in Hong Kong.