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While you were sleeping: US stocks advance

Wednesday 21st July 2010

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US equities rose, recovering from earlier losses, as an increase in building permits bolstered homebuilders and commodity producers.

US homebuilders rose after building permits, a gauge of future construction, rose 2.1% last month to a 586,000 pace, bolstered by a 20% jump in multifamily applications that are often volatile.

In late trading, the Dow Jones industrial average rose 0.37%, the Standard & Poor's 500 Index gained 0.71% and the Nasdaq Composite Index advanced 0.49%.

Among the most active stocks on Wall Street were Goldman Sachs Inc, Lennar Corp and US Steel.

“The market has digested the perfect storm of bad economic and earnings news at the open,” Art Hogan, chief market analyst at New York-based Jefferies Group Inc, told Bloomberg News.

“Materials and energy stocks are rising on a turnaround in commodity prices as the dollar has pulled back versus the euro. It’s knocked out one of the legs in the sell-story.”

Even so, lower-than-estimated sales at International Business Machines Corp and Texas Instruments Inc damped optimism about the earnings season.

IBM and Texas Instruments stocks fell as they joined Bank of America Corp and General Electric Co in posting revenue that missed analysts’ estimates. While second-quarter net income at S&P 500 companies has topped estimates by 11%, revenue has been 3.3% more than forecast, according to data compiled by Bloomberg News.

Investors are focused on US Federal Reserve Chairman Ben Bernanke’s delivery of the semiannual report on monetary policy to the Senate Banking Committee tomorrow. He will testify at the House Financial Services Committee on July 22.

Meanwhile, the Bank of Canada raised its key interest rate, as expected, but said the domestic and global recovery would be slower than it had previously forecast.

Canada's central bank became the first in the Group of Seven advanced economies last month to raise rates from the emergency lows introduced during the global financial crisis. It took a second step today, lifting the rate 25 basis points to 0.75%.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’, fell 7.47% to 24.03.

The Stoxx Europe 600 Index edged 0.1% higher to 246.35. Even so, two stocks declined for everyone that gained.

Across Europe, the UK’s FTSE 100 fell 0.17%, France’s CAC 40 lost 0.53% and Germany’s DAX declined 0.69%.

Among the most active stocks in Europe were Cable & Wireless Plc, Daimler AG, Rio Tinto Group and BHP Billiton.

Hungary’s short-term borrowing costs jumped at its first debt sale since international creditors suspended talks, hurting he forint and fanning concern that interest rates might rise.

The government raised less than targeted for the fourth time since June, selling 35 billion forint (US$156 million) of three-month Treasury bills, compared with the 45 billion forint planned, according to the debt management agency’s Bloomberg page. Bids at the weekly auction totaled 52.5 billion forint. The average yield climbed to 5.47%, the highest since March 2, from 5.28 percent.

US Treasuries rose.  The yield on the benchmark 10-year note fell 2 basis points, or 0.02 percentage point, to 2.95% at 3:24pm in New York, according to BGCantor Market Data.

Two-year yields touched 0.5683%, the lowest ever.

The Dollar Index, which measures the greenback against a basket of six major currencies, edged 0.12% higher to 82.72.

The euro fell against the US dollar ahead of the results from stress tests on European banks.

Investors questioned whether the euro would sustain gains above US$1.30 given that the stress test results due on Friday might show weakness in some euro zone banks.

"We've just seen a decent round of profit-taking. There is concern about the stress tests results," John McCarthy, director of foreign exchange trading at ING Capital Markets in New York, told Reuters.

"We've touched a high of almost US$1.3030. People said that's enough for the euro for the time being."

In midday New York trading, the euro traded 0.3% lower at US$1.2903. Against the yen, the euro rose 0.3% to 112.57.

The US, dollar rose 0.6% to 87.23 yen.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, gained 0.12% to 261.52.

Oil rose before weekly oil inventory reports that are expected to show crude supplies fell last week.

US crude for August delivery rose 61 cents to US$77.15 a barrel by 11.57am EDT. The August US crude contract expires on Tuesday. The more liquid September contract gained 57 cents to US$77.47.

Front-month ICE Brent crude for September delivery rose 46 cents to US$76.08.

"Expectations of another stock draw in domestic crude oil stocks are supporting the rise in crude futures,” Andy Lebow, broker at MF Global in New York, told Reuters.

Gold gained more than 1% as investors stocked up on the precious metal as a haven from volatility in other markets.

Spot gold was bid at US$1,190.95 an ounce at 1541 GMT against US$1,180.35 late in New York on Monday. US gold futures for August delivery rose US$8.10 an ounce to US$1,190.

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