Commodities, Aussie Drop on China Manufacturing; Stocks Gain

The Standard & Poor?€™s 500 Index advanced 1.4 percent to 1,339.67 at 4 p.m. in New York, extending its weekly rally to 5.6 percent. Yields on 10-year Treasury notes rose three basis points, reaching their highest level since May. The S&P GSCI index of 24 commodities dropped 0.7 percent as corn tumbled to the lowest level since December and crude oil dropped for the first time in four days. The Swiss franc depreciated against all 16 major currencies monitored by Bloomberg.

A U.S. report from the Institute for Supply Management today showed manufacturing growth unexpectedly picked up in June. Greece may receive as much as 85 billion euros ($124 billion) in a second bailout aimed at preventing default, according to an Austrian Finance Ministry official. Factory output growth fell to the lowest level since February 2009, according to the China Federation of Logistics and Purchasing.

?€œWe had a positive surprise with U.S. manufacturing data,?€ said Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion. ?€œThat not only indicates that the recent soft patch is temporary, it also tells you that we?€™ll continue to see strength in global growth. In Europe, they are buying themselves more time away to solve their debt crisis. We should see a decent second half for the economy and the markets.?€

Dow, S&P Gain

The Dow Jones Industrial Average gained 1.4 percent today and advanced 5.4 percent for the week, joining the S&P for the highest weekly advance since July 2009. Stocks climbed for the past five days as Greek Prime Minister George Papandreou maneuvered to win support for his 78-billion euro austerity package, qualifying the country for the next tranche of financial aid from the European Union.

The rally helped the S&P 500 erase more than 75 percent of the decline it suffered since reaching its high for the year on April 29. Through June 24, U.S. equities had fallen for seven of the previous eight weeks on concern the European debt crisis would spread and the U.S. economy slow. The index is up 6.5 percent for the year, data compiled by Bloomberg show.

Stocks jumped today after the ISM said its factory index rose to 55.3 in June from 53.5 the prior month. Economists projected the gauge would drop to 52, according to the median forecast in a Bloomberg News survey.

Rebounding Industry

The report is a sign industry is rebounding after shortages of parts and components from Japan slowed production, and may ease concerns after other figures today showed manufacturing growth is slowing from China to Europe. China?€™s factory index fell in June to the weakest level since February 2009, while in the 17-nation euro area, a gauge slipped to an 18-month low. German manufacturing expanded at the slowest pace in 17 months, while Italy, Ireland, Spain and Greece contracted.

Confidence among U.S. consumers declined in June. The Thomson Reuters/University of Michigan said today its final index of sentiment fell to 71.5 from 74.3 in May.

Home Depot Inc., 3M Co. and Intel Corp. rallied at least 1.4 percent, pacing gains among companies most-dependent on economic growth. The Dow Jones Transportation Average, a proxy for economic growth, rose 2.3 percent. Eastman Kodak Co. tumbled 14 percent after a trade panel failed to reach consensus on the camera company?€™s claims that Apple Inc. and Research In Motion Ltd. infringe its image-preview technology.

Treasuries Slump

About 6.3 billion shares changed hands on U.S. exchanges at 4:27 p.m., 12 percent less than the three-month average through yesterday ahead of the Independence Day holiday.

Treasuries fell as the U.S. manufacturing report reduced concern the economic recovery is stalling. Benchmark 10-year notes had their steepest weekly loss in almost two years, as yields rose three basis points to 3.19 percent. Treasuries returned 2.4 percent in the second quarter after losing 0.1 percent in the first three months of the year, according to Bank of America Merrill Lynch indexes.

U.S. debt was routed this week as a total of $99 billion in notes sold in three government auctions drew poor demand. Treasuries also fell as the Fed completed yesterday its $600 billion program of debt buying, which was aimed at capping borrowing costs. The central bank said following its June 21-22 policy meeting that it would maintain its policy of reinvesting principal payments from its securities holdings.

Corn, Crude Slump

Corn fell for a third day, losing 3.8 percent, after the U.S. Department of Agriculture said yesterday U.S. farmers planted a bigger crop than analysts were expecting. Prices reached $5.755, the lowest for the most-active contract since Dec. 13. The grain is up 55 percent in the past year. Gold futures lost 1 percent, reaching a six-week low, as progress in Greece against a default curbed demand for the metal as an investment haven.

Crude oil fell 0.5 percent to $94.94 a barrel. Futures tumbled as much as 2.1 percent on the weak economic data from China and Europe, then pared losses following the U.S. manufacturing report. The U.S. and China are the world?€™s two largest oil-consuming countries, and manufacturing numbers are used as indicators for fuel demand growth. Oil prices gained 4.2 percent this week, the most since the period ended April 8. They have risen 30 percent in the past year.

The Swiss franc, considered an investment haven, slid 1.1 percent versus the euro and 1 percent against the dollar, as investors sought higher-yielding currencies. The euro gained 0.2 percent versus the dollar, to $1.4525, extending its advance for the week to 2.4 percent. The yen depreciated versus 15 of 16 major peers, falling the most against the Swedish krona.

Conference Call

The yield on the Greek two-year note rose eleven basis points, following three days of declines. European Union finance chiefs will hold a conference call tomorrow to free up a fifth installment of aid to Greece from last year?€™s bailout. Greece needs that 12 billion-euro payment to meet a 6.6 billion-euro bond maturity in August.

The MSCI All-Country World Index gained 1.1 percent. Three shares advanced for every two that fell in the Stoxx Europe 600 Index, which rose 0.8 percent. The Stoxx 600 gained 4.1 percent this week, the biggest jump since July.

--With assistance from Claudia Carpenter, Abigail Moses, Michael Patterson, Andrew Rummer and Daniel Tilles in London. Editor: Jeff Sutherland

To contact the reporters on this story: Stephen Kirkland in London at This e-mail address is being protected from spambots. You need JavaScript enabled to view it ; Jeff Sutherland in New York at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

To contact the editor responsible for this story: Nick Baker at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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