U.S. Markets Wrap: Stocks Gain, Bond Fall as Economy Rebounds

June 18 (Bloomberg) -- U.S. stocks snapped a three-day losing streak and Treasuries fell as reports on jobless claims and manufacturing added to evidence the recession may be near a bottom. The dollar and oil rose.

Bank of America Corp. and JPMorgan Chase & Co. climbed at least 4.4 percent as the number of people collecting unemployment insurance fell by the most in almost eight years. Alcoa Inc. and DuPont Co. added more than 1.7 percent as gauges of leading economic indicators and Philadelphia’s economy topped economists’ estimates. Discover Financial Services rallied as the credit-card company’s loan losses grew less than forecast.

“The market has run out of fantastic reasons to sell,” said Stephen Wood, who helps manage $136 billion as chief market strategist for North America at Russell Investments in New York. “Those Armageddon, Great Depression, worst-case scenarios being priced in a few months ago are now a low probability, and the recovery reflects that.”

The Standard & Poor’s 500 Index rallied 0.8 percent to 918.34 at 4 p.m. in New York. The Dow Jones Industrial Average advanced 57.59 points, or 0.7 percent, to 8,554.77. The Nasdaq Composite lagged other indexes, slipping less than 0.1 percent as SanDisk Corp. tumbled on an analyst downgrade.

Treasuries fell for a second day as the reports showed the deepest recession in 50 years may be ending and the U.S. said note sales will increase to a record $104 billion next week. The dollar gained 0.4 percent against the euro and oil rose 0.3 percent to $71.37 a barrel.

Ten-Year Yields

Ten-year yields touched the highest in almost a week amid concern President Barack Obama’s record borrowing will overwhelm demand. The difference in yield between 2- and 10-year notes widened to 2.56 percentage points, the most in over a week.

“There’s so much focus on the borrowing amounts Treasury will face over the next couple of years,” said Carl Riccadonna, a senior economist at Deutsche Bank Securities Inc., in New York. Deutsche is one of 17 primary dealers that trade with the Federal Reserve. “There’s evidence that the economy may be turning the corner. That’s pushing yields up.”

The 10-year note yield rose 13 basis points, or 0.13 percentage point, to 3.82 percent, according to BGCantor Market Data. It touched 3.84 percent, the highest since June 12. The 3.125 percent security maturing in May 2019 fell 1, or $10 per $1,000 face amount, to 94 9/32.

The U.S. Dollar Index, a six-currency gauge of the greenback’s value, gained 0.5 percent to 80.590.

Auctions

Stocks opened higher as the Labor Department said continuing jobless claims decreased by 148,000 to 6.69 million, the first drop since January, even after weekly initial claims increased 3,000 to 608,000. Gains accelerated after the Conference Board’s index of leading economic indicators climbed 1.2 percent and a Federal Reserve report showed Philadelphia- area manufacturing shrank at the slowest pace in nine months.

The Treasury said it will auction $40 billion in two-year notes on June 23, $37 billion of five-year debt the following day, and $27 billion of seven-year securities on June 25. The total is $3 billion more than when the government last sold notes of similar maturities and the most since the U.S. began sales of this combination of maturities in February.

Daniel Fuss, the Loomis Sayles bond fund manager who has matched the returns of Pacific Investment Management Co.’s Bill Gross for the past decade, isn’t tempted by Treasuries even after yields on the 10-year note have climbed more than 64 percent this year.

The Greenback

The dollar strengthened against the euro for the first time in three days on speculation changes in how the London interbank offered rate is set may increase the borrowing costs for the greenback outside the U.S.

Investors also abandoned bets that the euro would appreciate further after the common European currency failed to strengthen beyond $1.40. The British Bankers’ Association said it may allow more institutions to take part in the daily survey that sets Libor, the benchmark for more than $360 trillion of financial products around the world.

The dollar gained 0.4 percent to $1.3890 per euro at 3:34 p.m. in New York, from $1.3942 yesterday. It touched $1.4001. The dollar rose 1 percent to 96.66 yen.

Gold fell on speculation that a stronger dollar and an improving U.S. economy will reduce the metal’s investment appeal. Silver also declined.

Crude oil rose after the reports signaled that the U.S. economy will rebound later this year, prompting an increase in energy demand.

“The market is stubbornly holding up,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut. “Prices are up on expectations that the economy is recovering and demand will strengthen.”

Crude oil for July delivery rose 27 cents, or 0.4 percent, to $71.30 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures dropped as much as 81 cents, or 1.1 percent, earlier today. Prices are up 60 percent this year and reached a seven-month high of $73.23 on June 11.