Stocks Advance as Concern Eases debt declining Treasury

Stocks climbed, rebounding from yesterday’s slide, while Treasuries and the dollar declined as improved demand for Portuguese and Polish bonds tempered speculation Europe’s debt crisis will trigger another recession.
The Standard & Poor’s 500 Index gained 0.9 percent to 1,101.43 at 12:32 p.m. in New York and the Stoxx Europe 600 Index advanced 1 percent. The premium investors demand to hold Portuguese 10-year bonds instead of benchmark German bunds was 350 basis points after reaching a record 372 points yesterday. The dollar weakened against 15 of 16 major peers. Coffee rose to a 13-year high amid speculation of a possible supply shortfall. 

Concern that European governments will struggle to fund deficits diminished as Portugal’s sale of bonds due in 2021 attracted bids for 2.6 times the amount offered, compared with 1.6 times in a March sale. Poland’s auction of five-year debt attracted the strongest demand since 2008. U.S. Treasuries slipped as investors bet that two-year yields near a record low aren’t justified given the reduced risk of another recession.
“This is a market dominated by short-term concerns,” said David Kelly, who helps oversee $445 billion as chief market strategist for JPMorgan Funds in New York. “It’s not a long- term, logical, fundamental market. We’re seeing a knee-jerk reaction after yesterday’s selloff. The talk of a double dip recession in 2010 is a little bit like Hurricane Earl -- none of that actually showed Earl hitting land, but you never know.”
Costco, Staples Rally
The S&P 500 recovered most of yesterday’s 1.2 percent drop, which was triggered by concern European banks will require more capital to absorb losses from government debt. Costco Wholesale Corp. rose 1.2 percent and Staples Inc. advanced 3 percent after Goldman Sachs Group Inc. advised buying shares in the retailers.
Alcoa Inc., JPMorgan Chase & Co. and Caterpillar Inc. rose at least 2.3 percent to lead gains in 25 of 30 Dow Jones Industrial Average stocks. Financial shares rallied 1.5 percent as a group for the top gain among 10 industries.
Global regulators reached a compromise that will introduce higher capital requirements for banks over a five- to 10-year period starting in 2013, a German central bank official said. The Basel Committee on Banking Supervision drafted key points of the so-called Basel III reforms, Bundesbank Vice President Franz-Christoph Zeitler told reporters in Frankfurt.
The proposal will be the basis for the Sept. 12 meeting of the Group of Governors of Central Banks and Heads of Banking Supervision Authorities who will decide on the reform framework. Group of 20 leaders meet in November to approve the rules.
Beige Book
The Federal Reserve will release its Beige Book survey of conditions in its 12 districts at 2 p.m. in Washington today before officials meet to review monetary policy on Sept. 21. A separate report from the Fed at 3 p.m. may show consumer credit in the U.S. declined by $4.5 billion in July, a sixth straight loss, according to the median of 35 economists in a Bloomberg survey.
Three stocks rose for each that fell in Europe’s Stoxx 600. BP Plc jumped 1.3 percent after its credit ratings were raised by Fitch Ratings to reflect an end to the threat of leaks from the Macondo well in the Gulf of Mexico. BP today released its internal investigation of the causes of the oil spill.
Ericsson AB rallied 4.6 percent as Credit Suisse Group AG reiterated its “outperform” recommendation for the shares.
Germany’s DAX Index climbed 0.8 percent even after the nation’s exports slumped 1.5 percent in July, the first drop in three months, the government said.
The yield on 10-year Treasuries rose 9 basis points to 2.67 percent before a government sale of $21 billion worth of notes today, the second of three debt auctions this week totaling $67 billion.
‘Some Relief’
Portuguese bonds pared earlier declines, with the yield on the 10-year note rising 2 basis points to 5.8 percent after the sale of about 1.04 billion euros ($1.32 billion) of 2013 and 2021 debt today.
“Today’s news flow on debt sales in Europe is giving some relief,” said Roberto Campani, senior portfolio manager at Pioneer Investments in Dublin, which manages the equivalent of $236 billion. “We are in a situation where the swinging from risk-on to risk-off is a bit too quick as skepticism over a self-sustainable economic recovery and concern over a double-dip in western markets persist.”
Irish bonds rose relative to benchmark German bunds after the nation’s government said it plans to split Anglo Irish Bank Corp Ltd. into two parts. The advance narrowed the so-called yield spread with bunds by 3 basis points to 369 basis points after it widened to a record 377 basis points earlier.
Gold, Coffee
Gold for immediate was little changed at $1,256.35 an ounce, near the record $1,265.30 reached in June. October crude oil advanced 1.5 percent to $75.23 a barrel on the New York Mercantile Exchange.
Coffee rose to a 13-year high in New York on concern about a potential lack of supply. Arabica coffee for December delivery rose as high as $1.9865 a pound on ICE Futures U.S., gaining for a fifth day and reaching the highest level since August 1997.
Before today, coffee surged 55 percent in the past year amid slumping inventories and on concern that too much rain would damage South American crops. Colombia’s coffee harvest may decline in 2011 after wet weather caused the worst outbreak of a plant-damaging fungus in a quarter-century.
The MSCI Emerging Markets Index slipped 0.1 percent. China Mobile Ltd. retreated 3.8 percent, its biggest decline since August 2009, after Vodafone Group Plc said it’s selling its 3.2 percent stake in the company.
To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Stephen Kirkland in London at skirkland@bloomberg.net.