U.S. Stocks Advance as Emerging Markets, Commodities Retreat Share Business Exchange

By Michael P. Regan Jan. 26 (Bloomberg) -- U.S. stocks gained on higher-than- estimated consumer confidence and earnings, while commodities fell and Asian equities extended their longest slump in two years on concern lending restrictions in China will curb growth. The Standard & Poor’s 500 Index rose 0.4 percent to 1,100.63 at 12:08 p.m. in New York. Oil, copper, silver and lead retreated as the dollar strengthened, while the MSCI Asia- Pacific Index sank 1.7 percent for a seventh straight day of losses. Europe’s Dow Jones Stoxx 600 Index recovered from earlier declines and added 0.5 percent. Treasuries pared gains, leaving the benchmark 10-year note’s yield down less than 0.01 percentage point at 3.63 percent. The Conference Board’s confidence index increased to 55.9 this month, higher than the median estimate in a Bloomberg survey, as the job market improved and Americans became more upbeat about the immediate future. Apple Inc. and Travelers Cos. gained at least 2.9 percent and DuPont Co. climbed 0.8 percent as quarterly profits topped estimates, bolstering optimism that improving earnings will justify a 10-month rally in equities. “The consumer confidence rebound is great news for the stock market,” said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. “The consumer is key for the economy. On top of that, the latest earnings numbers are very supportive. However, concern about a Chinese cool-down is still out there. China is one of the engines of the global economy.” The S&P 500 tumbled 5.1 percent in the final three days of last week, its biggest slide since sinking to a 12-year low in March, after President Barack Obama proposed reining in risk- taking at banks and concern grew over China’s measures to cool growth. Earnings Season A record nine-quarter earnings slump for S&P 500 companies is projected to have ended in the fourth quarter with a 73 percent increase in profits. More than 130 companies in the index are scheduled to release results this week. Asian shares slid as Bank of China Ltd. and China Construction Bank Corp. were told to restrict new loans, according to people familiar with the matter, potentially slowing expansion in the world’s fastest-growing major economy. Record government borrowing is troubling investors even as economies rebound. Credit-default swaps on Chinese government debt hit a two- month high, according to CMA DataVision. Standard & Poor’s cut its outlook on Japan’s AA sovereign credit rating to “negative,” citing diminishing flexibility to cope with debt. ‘Looming Risk’ “There’s a looming risk of governments making decisions that adversely affect the economy, and that’s materializing in China,” said Tim Brunne, a credit strategist at UniCredit SpA in Munich. “We’ve had a huge amount of fresh credit from banks supporting the Chinese economy and the question has always been if the money flooding into the economy was really helpful or driving asset bubbles.” While German business confidence rose more than economists forecast to an 18-month high, Fitch Ratings said European governments will need to borrow 2.2 trillion euros ($3.1 trillion) from capital markets in 2010. That amounts to 19 percent of GDP. The U.K. economy resumed growth at a slower pace than economists forecast in the fourth quarter. Service industries and manufacturing expanded just enough to pull Britain out of its longest recession on record. Growth Forecasts Raised The International Monetary Fund raised its forecast for global economic growth this year, to 3.9 percent from a 3.1 percent projection in October. The Washington-based lender predicted a 2.7 percent expansion in the U.S. and 10 percent in China. Still, high unemployment and rising public debt will restrain growth and contain inflation, the IMF said. The MSCI World Index trimmed losses as U.S. shares extended gains, leaving it little changed after four straight declines. The Dubai Financial Market General Index sank 3.6 percent, the biggest loss among benchmark indexes. The MSCI Emerging Markets Index fell 2 percent as JPMorgan Chase & Co. downgraded Brazil’s stocks to “neutral,” sending the benchmark Bovespa index down 1.4 percent. Taiwan’s Taiex lost 3.5 percent and Russia’s Micex Index dropped 2.2 percent as oil prices slumped. All but one of 26 developing-nation currency tracked by Bloomberg weakened against the dollar, led by a 1.1 percent decline in South Korea’s won after that nation’s economic growth slowed more than estimated in the fourth quarter. The Dollar Index, which tracks the U.S. currency against of those of six major trading partners, snapped three days of declines to advance 0.3 percent. Crude oil for March delivery retreated to $74.86 a barrel in New York. Copper for delivery in three months fell 1.1 percent to $3.3535 a pound in New York, helping to lead a decline in industrial metals. China is the world’s second- biggest oil consumer and the biggest user of copper. Palladium for immediate delivery declined 2.8 percent to $430.25 an ounce and platinum dropped 1.1 percent. To contact the reporter on this story: Michael P. Regan at mregan12@bloomberg.net.