U.S. Stocks Advance, Treasuries Decline on Economy

U.S. stocks rebounded from a three- month low, European shares rallied, Treasuries fell and the euro snapped a four-day decline versus the dollar on signs that manufacturing is recovering around the world.

The Standard & Poor’s 500 Index added 0.9 percent at 11:09 a.m. in New York, led by Exxon Mobil Corp. after the largest U.S. oil company posted earnings that beat analysts’ estimates. The MSCI World Index of equities in 23 developed nations rose for the first time in nine days, climbing 0.7 percent. The euro strengthened 0.6 percent against the dollar and yen. Emerging- market currencies rallied, led by the zloty as factory production rose from Poland to South Africa.

U.S. manufacturing expanded the most since August 2004, the Institute for Supply Management said today, adding to evidence the recovery in the world’s biggest economy is gaining momentum. Concern about the durability of the global recovery had sent stocks to the largest monthly retreat since February 2009 as China moved to curb lending and Greek bond yields surged.

“People are seeing there’s strength in the economy and that corporate earnings are beating estimates,” said Peter Jankovskis, who helps manage about $1.7 billion as co-chief investment officer at Oakbrook Investments in Lisle, Illinois. “Investors are seeing the sell-off of last week as a buying opportunity.”

The S&P 500 climbed after posting a 3.7 percent drop in January. Exxon gained 2.2 percent as profit fell less than estimated because of higher oil prices and output.

Beating Estimates

A record nine-quarter earnings slump for S&P 500 companies is projected to have ended in the final three months of 2009 with a 76 percent increase in profits. Almost 80 percent of the results released since Jan. 11 topped the average forecasts of Wall Street estimates, data compiled by Bloomberg show.

Citigroup Inc. rallied a fourth straight day after people familiar with the matter said the bank plans to sell or split off its $10 billion Citi Private Equity unit.

The MSCI World fell as much as 0.4 percent earlier today. Asian stocks dropped on concern China will take more steps to prevent its economy from overheating. Toshiba Corp. declined 6 percent in Tokyo after cutting its revenue forecast. Honda Motor Co. slid 2.5 after saying it’s recalling some cars in North America and the U.K.

Europe’s Dow Jones Stoxx 600 Index added 0.6 percent, reversing a 0.8 percent loss. Ryanair Holdings Plc advanced 7.1 percent in Dublin after Europe’s biggest discount airline raised its profit forecast.

Orders, Production

U.S. manufacturing expanded in January at the fastest pace in more than five years, spearheading the recovery from the worst recession since the 1930s. The Institute for Supply Management’s factory index rose to 58.4, exceeding the highest estimate in a Bloomberg News survey of economists, figures from the Tempe, Arizona-based group showed. Readings greater than 50 signal expansion. The gain reflected increases in orders, production and employment.

A separate report from Markit Economics showed Europe’s factory output also grew more than forecast last month.

Commodities rallied following the manufacturing reports, with the Reuters/Jefferies CRB Index of raw-material prices adding 0.7 percent and rising for the first time in five days. Crude oil futures advanced 1 percent to $73.58 a barrel in New York, while natural gas surged 4.8 percent to $5.377 per million British thermal units. Gold futures rose 1 percent to $1,094.50 an ounce.{loadposition in-article}

$1.6 Trillion Deficit

Treasuries fell for the first time in three days with President Barack Obama budget proposal projecting this year’s deficit will hit a record $1.6 trillion. The yield on the 10- year note rose 0.06 percentage point to 3.65 percent, according to BGCantor Market Data.

Ten-year yields will climb to 4.19 percent by year-end, according to a Bloomberg survey of financial companies with the most recent forecasts given the heaviest weightings.

The euro advanced from the lowest level in almost seven months, increasing 0.3 percent to $1.3901. It added 0.6 percent to 125.92 yen, from 125.13. The dollar gained 0.5 percent to 90.70 yen, compared with 90.27.

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