Dollar Falls as Oil Helps S&P 500 Recoup Almost Half of Rout
Dec. 23 (Bloomberg) -- The U.S. dollar weakened after sales of new American homes unexpectedly fell last month, spurring concern about the durability of the economic recovery. Oil surged the most in a month following a bigger-than-forecast drop in inventories, driving the Standard & Poor’s 500 Index higher.
The dollar lost as much as 0.8 percent to $1.4366 per euro, retreating from the strongest level since September. Oil rose 3.1 percent to $76.67 a barrel in New York. The fuel’s gain helped send the S&P 500 up 0.2 percent to 1,120.59, just below the 1,120.84 level that would mark a recovery of half of the index’s 57 percent plunge between October 2007 and March 2009. The MSCI Emerging Markets Index of equities in developing nations added 1.3 percent on predictions for faster growth in China and India.
The U.S. Commerce Department said home sales decreased 11 percent to an annual pace of 355,000, lower than the lowest estimate of economists surveyed by Bloomberg News. The prospect that a government tax incentive would expire, combined with a 10 percent jobless rate and competition from foreclosed properties may have hurt builders such as Beazer Homes USA Inc.
“We’re seeing some softness in the economy now with housing as an example,” said Michael Vogelzang, who helps manage $1.8 billion as chief investment officer at Boston Advisors in Boston. “It starts to feel to us like we’re getting a pullback in the economy after the bounce off the bottom in housing.”
China, India Growth
Stocks rose around the world after Citic Securities Co. said China’s gross domestic product may expand 12 percent next year. Shares also rallied as Pranab Mukherjee, India’s finance minister, said his nation’s growth may accelerate as industrial production rebounds. Consumer confidence in Italy unexpectedly rose to the highest in more than seven years.
The S&P 500’s so-called 50 percent retracement of its 17- month plunge through March 9 would be a bullish sign to some analysts who make forecasts using price charts. Some technical analysts use Fibonacci ratios, based on proportions found in nature, to predict stock market levels. To adherents, the performance of an asset when it gains back 50 percent of a retreat can be used to forecast whether the advance will continue.
“The path of least resistance will continue to be to the upside,” Robert Doll, who helps oversee about $3.2 trillion as chief investment officer for global equities at New York-based BlackRock Inc., said in a Bloomberg Television interview. The economic recovery “means earnings should be somewhat better and liquidity should still be plentiful. That’s a recipe for equities moving higher,” Doll said.
Metals, Oil
Raw-materials and energy producers had the biggest and third-largest gains in the S&P 500 among 10 industries, rising 1.5 percent and 0.5 percent, respectively. The Dollar Index, which gauges the currency against six major trading partners, lost 0.4 percent to 77.913 as it retreated from the strongest level since September.
Oil futures surged after U.S. stockpiles fell 4.84 million barrels, triple the average analyst estimate in a Bloomberg survey. Anadarko Petroleum Corp., an oil explorer, added 2.5 percent to $64.23.
Copper futures climbed 2.1 percent, the most in five weeks. Freeport-McMoRan Copper & Gold Ltd., the world’s largest publicly traded producer of the metal, advanced 3.2 percent to $80.93. Newmont Mining Corp., the largest U.S. gold producer, advanced 2.8 percent to $48.04 as the precious metal rallied 0.7 percent.
Schlumberger Ltd. added 2 percent to $65.23. The shares were raised to “overweight” from “equal weight” at Barclays, which cited the company’s “financial strength, deep management and a product line that benefits more than most from increased exploration activity.”
To contact the reporters on this story: Nick Baker in New York at nbaker7@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net.
Last Updated: December 23, 2009 16:22 EST
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