U.S. Stocks Climb, Pushing Dow Average to Highest Close of 2009

U.S. stocks gained, sending the Dow Jones Industrial Average above its highest close in a year, after Alcoa Inc. unexpectedly reported a profit and economic data signaled the U.S. recession is ending.
Alcoa jumped 11 percent, the most since June, after the largest U.S. aluminum producer cut jobs and raw-material costs faster than analysts projected. Newmont Mining Corp. and Freeport-McMoRan Copper & Gold Inc. rallied more than 10 percent on record gold prices. Macy’s Inc., the second-biggest department-store chain, soared 10 percent as U.S. retailers said same-store sales rose for the first time in 13 months.
“If we can get the retail numbers to keep going up, then the stock market will go up,” said Jerome Dodson, who oversees $2.5 billion at Parnassus Investments in San Francisco. “By the end of the year, I expect the market to be somewhat higher than we are today.”
The Standard & Poor’s 500 Index climbed 4.5 percent to 1,071.49 for the biggest weekly advance in three months. The Dow average rose 377.27 points, or 4 percent, to 9,864.94. The Nasdaq Composite Index added 4.5 percent to 2,139.28.
Equities advanced as economic data showed first-time jobless claims slid to the lowest level since January and the U.S. service industries grew after 11 months of contraction. The S&P 500, up 58 percent in the past seven months, posted the first five-day rally for a week since November 2006.
Rising P/E’s
The gains have driven the index’s valuation to 20.3 times reported operating income for its companies, the most since 2004. The VIX, as the Chicago Board Options Exchange Volati Index is known, tumbled 19 percent to 23.12 for the steepest weekly decline since November. The index measures the cost of using options as insurance against S&P 500 declines.
The number of Americans filing first-time claims for unemployment benefits slid to 521,000 in the week ended Oct. 3, Labor Department data showed. That was below the median estimate for 540,000 claims from a Bloomberg survey of economists. The Institute for Supply Management’s index of non-manufacturing businesses, which make up almost 90 percent of the economy, rose to 50.9, above the line between expansion and contraction.
Alcoa rose to $14.24, the highest price since October. The company reported a profit of 4 cents a share, exceeding the average analysts’ estimate for a 9-cent loss.
Newmont, the largest U.S. gold producer, advanced to $46.50. Freeport-McMoRan, which operates the world’s biggest gold mine, climbed 13 percent to $74.34.
Gold Gain
Gold, which has climbed for seven of the past eight weeks, reached a record $1,062.70 on Oct. 8. Australia’s monetary- policy makers unexpectedly raised borrowing costs this week, triggering a decline in the dollar and a rally in bullion prices.
The Dollar Index, which tracks the currency against the yen, euro, Swiss franc, pound, Swedish krona and Canadian dollar, slid 0.9 percent to 76.35 for the week.
The Federal Reserve will be prepared to tighten monetary policy when the outlook for the economy “has improved sufficiently,” Chairman Ben S. Bernanke said at a Board of Governors conference in Washington on Oct. 8.
“Accommodative policies will likely be warranted for an extended period,” Bernanke said. “At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem.”
Macy’s rose to $19.15. Limited Brands Inc., which owns the Victoria’s Secret stores, soared 13 percent to $18.26.
Same Store
Data from Retail Metrics Inc. showed sales at U.S. chain stores open at least a year climbed 1.1 percent last month as discounts drew shoppers. Seventy percent of retailers reported sales results that exceeded the average of estimates compiled by the Swampscott, Massachusetts-based research firm.
“Even though the market has had a very big move off the bottom, there are still a lot of stocks out there that aren’t fully valued,” said Matthew Kaufler, who helps oversee $2 billion at Federated Clover Investment Advisors in Rochester, New York, in a Bloomberg Television interview.
Johnson & Johnson, Goldman Sachs Group Inc. and Google Inc. are among the 31 companies in the S&P 500 scheduled to release quarterly results next week. The index is projected to post a ninth straight period of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year, analysts’ estimates show.
Retail sales in the U.S. probably fell in September as dealer showrooms emptied out following the expiration of “cash for clunkers,” economists said before a report next week.

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American Incomes Head Down, Threatening Recovery in Spending

August 05 Household income in the U.S. is weakening as the influence of the government’s stimulus plan wanes, prompting economists, Federal Reserve officials and a Nobel laureate to warn that consumer spending may struggle.
“Consumers have started to change their behavior and they are going to save more,” said Richard Berner, co-head of global economics at Morgan Stanley in New York and a former researcher at the Fed. “You have pressure on wages, you have employment still declining.”
Wages and salaries, which drive recoveries in spending, fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department figures released yesterday. The Obama administration’s tax cuts, extended jobless benefits and a one-time Social Security bonus have helped mask the damage done by the worst employment slump since the Great Depression.
Personal incomes, which include interest income, dividends, rents and other payments as well as wages, tumbled 1.3 percent in June, more than forecast and the biggest drop in four years, yesterday’s Commerce report showed. Excluding the effects of the stimulus plan, June incomes would have dropped 0.1 percent after no change in May, according to the report. In May, one-time additional payments to Social Security recipients boosted incomes 1.3 percent.
One of every 10 American workers will be without a job by early 2010, economists project, shaking the confidence of those still on payrolls and discouraging spending. It may take as long as 15 years for consumers to fully repair finances battered by the decline in home values, stocks and employment, said Edmund Phelps, winner of the Nobel prize in economics in 2006.
Shrinking Net Worth
Decreasing pay is not the only hurdle for consumers. Plunging home prices and stocks reduced household net worth by a record $13.9 trillion from the third quarter of 2007 through this year’s first quarter, according to figures from the Fed.
“Households are going to have to do an awful lot of rebuilding of their wealth,” Phelps, a professor at Columbia University in New York, said this week in an interview on Bloomberg Television. “Even if that rebuilding goes on at a pretty good clip, it will take 12 or 15 years for households to get to the wealth level that they had several years ago. Consumer demand is going to take a long time to rebuild to normal levels.”
In the second half, incomes and spending will be hurt by the loss of transitory factors such as lower fuel prices, decreased tax rates and the one-time payment to retirees, William Dudley, president of the Fed Bank of New York, said in a speech last week.
Save More
“Consumer spending is unlikely to rise much faster than income” because of the need to boost savings, he said. “Weak income growth will be an effective constraint on the pace of consumer spending.”
Companies continue to trim expenses, threatening further cuts in pay and benefits. Tenneco Inc., the world’s largest maker of vehicle-exhaust systems, temporarily lowered pay and hours worked to reduce labor costs by 10 percent. Earlier this year, the Lake Forest, Illinois-based company suspended contributions to employees’ 401(k) retirement accounts and cut pay for the top 50 executives.
Government assistance such as the “cash-for-clunkers” program will help postpone the inevitable increase in savings and slowdown in spending as more baby boomers approach retirement, said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto.
“Spending is in desperate need of gimmicks like cash-for- clunkers in order to grow on a short-term basis,” he said.
Lifting Auto Sales
The program, which offers as much as $4,500 for trading in older, less fuel-efficient cars, ran through its $1 billion fund in about a week, and Congress is considering adding $2 billion. Auto industry data this week showed sales jumped to an 11.3 million annual pace last month, the highest level since September.
Mounting joblessness is among reasons that economists such as Rosenberg say will prompt Americans to save more. Unemployment, already at a 26-year high of 9.5 percent in June, may top 10 percent by early next year, according to the median estimate of economists surveyed by Bloomberg last month.
Economists estimate that a Labor Department report at the end of the week will show employers cut an additional 328,000 workers from payrolls in July. That would bring the total loss of jobs since the recession began in December 2007 to 6.8 million.
The savings rate in June fell to 4.6 percent as incomes dropped, yesterday’s Commerce Department report showed. The rate, which reached a 14-year high of 6.2 percent the previous month, is likely to keep climbing, Rosenberg said. A rate as high as 15 percent can’t be ruled out, he said.
“This is a different consumer than we had in the past 20 years,” Rosenberg said. “People are going to increasingly be putting more money into cookie jars, rather than into buying more cookie jars.”

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Oil Trades Little Changed Ahead of U.S. Crude Inventories Data

August 05 Oil traded little changed ahead of official figures expected to show U.S. crude inventories rose and as the dollar gained against the euro, reducing the investment appeal of dollar-denominated commodities.
An Energy Department report today will probably show U.S. crude stockpiles increased 600,000 barrels, according to analysts surveyed by forex news-4all.blogspot.com, in contrast to the 1.52 million barrel decline reported yesterday by the industry-funded American Petroleum Institute. Crude had risen as much as 0.6 percent after the API data, which has moved in the same direction as the government figures 76 percent of the time over the past four years, Bloomberg data show.
“The last few weeks, the API report was not in agreement with the DOE report, and there is some caution in the market on it,” said Victor Shum, a senior principal at consultant Purvin & Gertz Inc. in Singapore.
Crude oil for September delivery traded at $71.28 a barrel, down 14 cents, on the New York Mercantile Exchange at 1:21 p.m. in Singapore. Earlier, it rose 45 cents to $71.87 a barrel. Yesterday, oil dropped 16 cents, or 0.2 percent, to settle at $71.42 a barrel.
The dollar rose to $1.4395 per euro at 1:17 p.m. in Singapore from $1.4408 in New York yesterday. The U.S. currency declined to $1.4445 on Aug. 3, the lowest since Dec. 18.
Gasoline Supplies
U.S. gasoline inventories increased 2.1 million barrels to 215.7 million in the week ended July 31, the API report showed. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines.
“The API numbers seemed to provide a little bit of mild strength to prices,” Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney, said by phone. “This rally has been sentiment driven and it is largely dependent on equities maintaining momentum if oil is going to make new highs for 2009.”
The Energy Department is scheduled to release its report on crude stockpiles for the week ended July 31 at 10:30 a.m. in Washington.
Gasoline for September delivery fell 1.02 cents, or 0.5 percent, to $2.0465 a gallon in New York at 1:19 p.m. Singapore time. Yesterday, it declined 1.26 cents, or 0.6 percent, to end at $2.0567.
Brent crude oil for September settlement was trading at $74.35 a barrel on London’s ICE Futures Europe Exchange at 1:22 p.m. in Singapore, having earlier risen as much as 53 cents, or 0.7 percent, to $74.81. Yesterday, the contract rose 73 cents, or 1 percent, to $74.28.

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Yen Strengthens as Asian Stock Declines Spur Demand for Safety

August 05 The yen rose for a second day versus the dollar and the euro as regional equities and U.S. stock futures fell, spurring demand for the relative safety of Japanese assets.
The yen gained versus all of the 16 most-traded currencies as the MSCI Asia Pacific Index of regional shares declined for a second day and Standard & Poor 500 Index futures dropped 0.2 percent. Japan’s currency strengthened against the Australian dollar for the first time in five days amid speculation Japanese trusts will raise less cash to buy securities in higher-yielding nations.
“Players are looking at equity markets for direction, so when stocks fall, the yen rises,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “There’s a strong inverse relationship between the two.”
Japan’s currency rose to 94.96 per dollar as of 1:56 p.m. in Tokyo, from 95.23 yesterday in New York. The yen fetched 136.82 per euro from 137.21. The dollar traded at $1.4407 per euro from $1.4408 in New York yesterday. It declined to $1.4445 on Aug. 3, the weakest since Dec. 18.

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Payrolls Probably Declined at Slower Pace: U.S. Economy Preview

Aug. 2 -- Employers cut jobs in July at a slower pace and the factory slump eased, indicating the end of the worst U.S. recession since the Great Depression is getting closer, economists said before reports this week.
Payrolls fell by 325,000 workers after dropping by 467,000 in June, according to the median on 56 estimates in a Bloomberg News survey ahead of an Aug. 7 Labor Department report. The jobless rate probably rose to a 26-year high of 9.6 percent.
The figures will be a reminder that, even as Obama administration stimulus efforts gain traction, hiring will take longer to pick up as companies such as Deere & Co. and US Airways Group Inc. continue to cut costs. Estimates that the jobless rate will exceed 10 percent by early 2010 signal consumer spending will lag behind an economic recovery.
“The labor market will remain a headwind,” said Conrad DeQuadros, senior economist and a partner at RDQ Economics in New York. “The pace of layoffs has slowed, but that’s not enough. Given an environment where growth is likely to be extremely sluggish, unemployment will still go higher.”
The U.S. has lost 6.5 million jobs since the recession began in December 2007, the most of any economic slump in the post-World War II era. June’s unemployment rate of 9.5 percent was the highest since 1983.
Households see few signs the job market will improve. Tempe, Arizona-based US Airways said last month it will cut 600 jobs after the peak summer travel season ends in September. Moline, Illinois-based Deere, the world’s largest maker of agricultural equipment, said about 800 salaried employees will leave as part of a voluntary program.
Fewer Paychecks
Automatic Data Processing Inc., the world’s largest payroll processor, last week forecast full-year sales and profit that trailed analysts’ projections as the recession curbed customers’ spending. It gets about three-quarters of its sales from paycheck, tax and benefits processing.
“Our guidance reflects the uncertainty about the depth and length of the downturn,” Chief Financial Officer Chris Reidy said in an interview on July 30. “The pipeline of activity has picked up significantly, but CEOs and CFOs are still hesitant to make these investments.”
A report last week from the Commerce Department underscored estimates that the economy will pick up this quarter. Gross domestic product shrank at a 1 percent annual pace from April to June, less than forecast, after plunging 6.4 percent the prior three months.
Obama on Jobs
“We are still continuing to lose far too many jobs,” President Barack Obama said in a news conference on July 31 following the GDP release. “As far as I’m concerned, we won’t have a recovery as long as we keep losing jobs,” he said, and added that a rebound in hiring “won’t happen overnight.”
A record reduction in inventories over the first half of the year sets the stage for production to rebound, economists said. Companies including General Motors Co. and Chrysler Group LLC, both out of bankruptcy, may benefit from higher sales and a boost to output from the government’s “cash for clunkers” effort.
The House of Representatives on July 31 approved an emergency measure to add $2 billion to the automobile purchase program after a burst of demand exhausted most of the initial $1 billion in less than a week.
Sales figures from the auto industry are due tomorrow. Increasing demand will contribute to the stabilization in manufacturing already taking place.
Manufacturing, Services
The Institute for Supply Management may report tomorrow that its manufacturing index climbed to 46.5 in July, the highest level in almost year, according to the survey median. Readings below 50 signal contraction.
The slump in service industries, which make up almost 90 percent of the economy, is also waning. The Tempe, Arizona-based ISM’s gauge of non-manufacturing businesses probably increased to 48 last month from 47 in June, according to the Bloomberg survey. The report is due on Aug. 5.
The GDP report last week showed consumer spending, which makes up about 70 percent of the economy, has dropped 2 percent since it peaked at the end of 2007 -- the most since the 1980 recession. A Commerce report on June 4 will give the month-by- month breakdown on spending and incomes for the quarter.
Economists project the economy will grow at an average 1.5 percent pace from July to December, according to a Bloomberg survey taken in early July. The survey also showed they forecast the jobless rate will reach 10.1 percent in the first quarter of 2010.
In other reports this week, orders placed with factories fell in June, economists predicted ahead of Commerce figures due on Aug. 5. A day earlier, the National Association of Realtors may report the number of Americans signing contracts to buy previously owned homes rose in June for a fifth straight month.

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Dollar Weakens to Year Low on Signs Global Recession May End

The dollar declined to the lowest level this year against six major U.S. trading partners as optimism that a global recovery is near reduced demand for the greenback as a refuge.
The Swedish krona advanced against the euro to the strongest level since November after a government report yesterday showed the contraction in the Scandinavian country slowed last quarter. Federal Reserve Chairman Ben S. Bernanke told Congress last month that policy makers will maintain a “highly accommodative” monetary policy for an extended period.
“It’s clear that the economy is recovering,” said Adam Boyton, a strategist in New York at Deutsche Bank AG, the world’s largest currency trader. “Ben Bernanke is making it clear that although he has an exit strategy, he’s not going to use it any time soon. That’s probably been a small negative for the dollar.”
The dollar fell 1.6 percent last month to $1.4257 per euro in New York, from $1.4033 on June 30. The U.S. currency fell 1.7 percent to 94.68 yen, from 96.36 yen a month earlier. The Japanese currency gained 0.2 percent this month to 134.99 per euro, the first advance in three months.
The Dollar Index, which the ICE futures exchange uses to track the currency against counterparts including the yen, pound and Swedish krona, touched 78.22 yesterday, the lowest since Dec. 18. The index dropped 2.3 percent in July.
The dollar declined 1.3 percent versus the euro yesterday, the biggest loss in a month, as a report showing the U.S. economy shrank less than economists forecast added to signs the global recession may be ending, encouraging investors to buy higher-yielding assets overseas.
‘Some Restraint’
U.S. gross domestic product contracted at a less-than- projected 1 percent annual rate after shrinking a revised 6.4 percent in the prior three months, the most in 27 years, the Commerce Department said. Inventories dropped at a record $141.1 billion annual pace, after a $113.9 billion decline.
“The inventories data shows stunning drawdowns in both Q1 and Q2,” wrote Alan Ruskin, head of international currency strategy in North America at RBS Securities Inc. in Greenwich, Connecticut. “This bodes very well for H2 GDP data since the change of inventories should be very positive. Obviously there will be some restraint to this trade because of month-end flows, but I expect players will buy risk trades again early next week.”
‘Signs of Stabilization’
Bernanke told the House Financial Services Committee on July 21 that while the economy is showing “tentative signs of stabilization,” the central bank intends to keep interest rates low. The Fed’s benchmark target rate for overnight loans has been set at a range of zero and 0.25 percent since December.
A government report next week will probably show the U.S. lost 325,000 jobs in July, after reducing 467,000 the previous month, according to the median forecast of 56 economists surveyed by News. The report is due Aug. 7.
The Dow Jones Industrial Average index advanced 8.6 percent in July, the biggest monthly gain since 2002.
The Canadian dollar was the best performer among the major currencies, rising 7.9 percent versus the greenback, as stock gains and higher crude oil prices burnished the appeal of currencies linked to growth.
Canada’s currency touched C$1.075 against the greenback on July 28, the strongest level since Oct. 3, as crude oil reached $69 a barrel. Commodities, such as oil and gold, account for more than half of Canada’s exports. The currency ended the month at C$1.078 after a government report showed the nation’s economy shrank a more-than-forecast 0.5 percent in May.
‘Ahead of Fundamentals’
“There’s a disconnect between market optimism and numbers on the ground,” said Steven Englander, chief U.S. currency strategist at Barclays Plc in New York. “The Canadian dollar is running ahead of fundamentals. We had some pretty nasty number out of Canada recently.”
The Canadian currency will decline to C$1.13 in a month, according to Barclays.
The Swedish krona touched 10.237 per euro yesterday, the strongest since Dec. 1, after Statistics Sweden said the country’s gross domestic product contracted an annual, work-day adjusted 6.2 percent, from a decline of 6.5 percent in the previous quarter.
The krona gained 5.4 percent against the euro last month and 7.1 percent against the dollar. It was the second best performer among the 16 major currencies after the Canadian dollar, which rose 6 percent against the euro in July.
Moving Sideways
The euro-dollar exchange rate swung less than 3 cents above and below $1.40 in July. Implied volatility on seven major currencies against the dollar dropped to 12.73 yesterday, the lowest since October, indicating traders expect less price fluctuation in the foreign-exchange market in coming months.
“We are moving sideways until September when gradual improvement in macro data adds to fresh momentum for dollar shorts,” said Mike Moran, a senior currency strategist at Standard Chartered in New York. A short position is a bet a currency will decline.
Investors should buy the U.S. currency against the yen, with a target above 105 per dollar, as Japan’s trade and investment flows deteriorates, Goldman Sachs Group Inc. said yesterday in an e-mailed note.
The yen is the most overvalued currency in the Group of 10 major currencies, and “neutral” market positioning allows investors to add more bets against the Japanese currency, according to Goldman. Trade and investment flows to Japan have turned from a surplus of 6 percent of its GDP, to a deficit of 5 percent of the economy, according to Goldman.
“We could be getting closer to the tipping point for the yen,” Mark Tan, a Goldman analyst in New York wrote.

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U.S. Stocks Advance for Third Week as Earnings Beat Estimates

U.S. stocks rose for a third week, completing the Dow Jones Industrial Average’s best month since 2002, as companies from Motorola Inc. to MasterCard Inc. topped analysts’ profit estimates.
Amgen Inc., the world’s largest biotechnology company, and Dow Chemical Co., the largest U.S. chemical maker, gained after earnings beat projections. General Electric Co. surged 11 percent on speculation new banking rules will allow it to keep its finance unit. Yahoo! Inc. slumped after terms of an Internet-search accord with Microsoft Corp. were less favorable than analysts predicted.
“What’s been driving the market is the idea that maybe this recession isn’t going to be as severe or prolonged as we thought,” said Samuel Stewart, president of Wasatch Funds, which manages $5 billion in Salt Lake City. “The market is now behaving as though the credit crisis was a blip on the radar.”
The S&P 500 rose 0.8 percent to 987.48, the highest since Nov. 4, capping its fifth straight monthly advance. The main benchmark for American equity has rebounded 46 percent from a 12-year low on March 9. The Dow Jones Industrial Average rose 78.37 points, or 0.9 percent, to 9,171.61, extending its monthly advance to 8.6 percent, the biggest since October 2002. The Russell 2000 Index of small companies added 1.5 percent to 556.71.
Earnings Top Estimates
About three-quarters of the 148 companies in the S&P 500 that released second-quarter results this week topped estimates, according to data compiled by Bloomberg. Companies slated to report next week include Kraft Foods Inc., Procter & Gamble Co. and Cisco Systems Inc.
Companies in the S&P 500 are still headed for a record eighth consecutive decline in quarterly profits. Per-share earnings have tumbled 32 percent for the 352 companies in the S&P 500 that have reported results since June 17. Analyst estimates compiled by call for a 31 percent drop in the second quarter and a 22 percent third-quarter decline. While earnings are falling, results have topped projections by an average 10 percent.
“There is a broader sense that the decline is over,” said Stephen Lieber, chief investment officer of Alpine Mutual Funds in Purchase, New York, which manages $6 billion. “Corporate earnings in the last week have been singular in importance.”
Motorola climbed 8.8 percent to $7.16. The biggest U.S. mobile-phone maker posted a narrower second-quarter loss than analysts projected, helped by job cuts and a recovery in handset shipments.
MasterCard Climbs
MasterCard rose 4.6 percent to $194.03. The world’s second- biggest payment-card network reported earnings excluding some items of $2.68 a share, 11 percent higher than the average analyst estimate. MasterCard raised fees, slashed expenses and processed more transactions during the quarter.
Amgen added 2.3 percent to $62.31. The world’s largest biotechnology company raised its full-year earnings forecast after second-quarter profit excluding some items beat the average analyst estimate by 11 percent. Amgen cut research costs and increased sales of its arthritis drug Enbrel.
Dow Chemical advanced 4.9 percent to $21.17. The largest U.S. chemical maker posted an unexpected second-quarter profit as demand for its products stabilized. The average analyst estimate was for a loss.
GE Gains
General Electric, the world’s biggest non-bank financial company, advanced 11 percent to $13.40. U.S. Representative Barney Frank said manufacturers that already own finance businesses should be allowed under revised banking rules to retain them without being subject to Federal Reserve oversight of their manufacturing operations. Frank heads the U.S. House Financial Services Committee.
Financial stocks in the S&P 500 climbed 4.4 percent, the steepest among 10 industries. Old National Bancorp, an Indiana- based financial-service company, reported second-quarter profit excluding some items that was more than four times the average analyst estimate, sparking a rally in regional banks.
Marshall & Ilsley Corp., Wisconsin’s largest lender, led gains, surging 26 percent to $6.04. Old National climbed 15 percent to $11.30 and Zions Bancorp., the Utah lender that operates in 10 Western states, rose 21 percent to $13.58.
Yahoo fell 18 percent to $14.32. The owner of the second- most popular U.S. Internet search engine will use Microsoft’s search engine on its Web sites and sell ads that appear next to search results. The agreement with Microsoft, the world’s largest software maker, didn’t include an upfront payment for Yahoo, which some analysts had estimated could be as much as $3 billion.
Recession Saps Demand
Exxon Mobil Corp. led energy companies to the second- biggest decline among the S&P 500’s 10 main industry groups. The world’s largest energy company fell 2.6 percent to $70.39 after reporting its lowest profit in more than five years as the recession sapped fuel demand.
Masco Corp. rose 26 percent to $13.93 for the biggest gain in the S&P 500. The insulation installer forecast a loss this year of as little as 5 cents a share, compared with the average analyst loss estimate of 26 cents.
Akamai Technologies Inc. fell 22 percent to $16.44 for the biggest drop in the S&P 500. The provider of software that makes Web sites load faster reported profit excluding some items of 40 cents a share in the second quarter, missing the average analyst estimate by 1.5 percent.
Reports next week will probably show employers cut jobs at a slower pace in July and the factory slump eased, according to economists’ forecasts, suggesting the recession is ending.

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Dollar Weakens to Year Low as U.S. Economic Contraction Slows

The dollar declined to the lowest level this year against six major U.S. trading partners after a report showed the U.S. economy shrank less than economists forecast, reducing the demand for the greenback as a refuge.
The Swedish krona advanced against the euro to the strongest level since December after a government report showed the economic contraction in the Scandinavian country slowed in the second quarter. The U.S. currency headed for a fifth month of declines against the pound, its longest run in five years, after a U.K. survey showed consumer confidence held at the highest level since April 2008.
“The typical pattern is that good economic news is bad for the dollar,” said Win Thin, a senior currency strategist at Brown Brothers Harriman & Co. in New York. “Equities are marching up. We had a better than expected GDP, which set the stage for all this.”
The dollar fell 1.4 percent 1.4271 per euro as of 12:29 p.m. in New York, from $1.4075 yesterday, and was at 94.58 yen from 95.56 yen. The Japanese currency weakened 0.3 percent to 134.95 per euro.
The Dollar Index, which the ICE futures exchange uses to track the currency against counterparts including the yen, pound and Swedish krona, touched 78.22, the lowest since Dec. 18.
The dollar’s decline versus the yen accelerated after running into stops, or pre-set orders, to sell the greenback, above 95 yen, according to Shaun Osborne, a currency strategist at TD Securities Inc. in Toronto.
‘Some Restraint’
U.S. gross domestic product contracted at a less-than- projected 1 percent annual rate after shrinking 6.4 percent in the prior three months, the most in 27 years, Commerce Department figures showed. Inventories dropped at a record $141.1 billion annual pace, after a $113.9 billion decline.
“The inventories data shows stunning drawdowns in both Q1 and Q2,” wrote Alan Ruskin, head of international currency strategy in North America at RBS Securities Inc. in Greenwich, Connecticut. “This bodes very well for H2 GDP data since the change in the change of inventories should be very positive. Obviously there will be some restraint to this trade because of month-end flows, but I expect players will buy risk trades again early next week.”
The Swedish krona touched 10.3 per euro, the strongest since Dec. 1 after Statistics Sweden said the country’s gross domestic product contracted an annual, work-day adjusted 6.2 percent, from a decline of 6.5 percent in the previous quarter.
The krona has gained 4.8 percent against the euro this month and 5.6 percent against the dollar. It is the second best performer among the 16 major currencies after the Canadian dollar, which rose 7.6 percent against the dollar in July.
‘Ahead of Fundamentals’
Canada’s dollar traded at C$1.081 against the greenback, near the strongest since October, even after a government report showed the nation’s economy shrank a more-than-forecast 0.5 percent in May. The currency, known as loonie, touched C$1.075 on July 28, the strongest level since Oct. 3.
“There’s disconnection between market optimism and numbers on the ground,” said Steven Englander, chief U.S. currency strategist at Barclays Plc in New York. “The Canadian dollars running ahead of fundamentals. We had some pretty nasty number out of Canada recently.”
The Canadian currency will decline to C$1.13 in a month, according to Barclays.
Sterling gained 0.4 percent to $1.6557 after GfK NOP said that an index of consumer sentiment in the U.K. was unchanged in July at minus 25. The reading is up from minus 39 a year earlier, adding to signs that the U.K.’s worst slump in a generation is easing. The currency was up 0.5 percent in July.
Implied Volatility
The Polish zloty advanced a record 8 percent this month to 2.93 per euro, as the country posted the only positive first- quarter growth rate among European Union’s 10 eastern members. The currency was the biggest gainer among 26 emerging-market counterparts tracked.
The dollar dropped against 14 of 16 most actively traded currencies this month, losing 1 percent against the euro. The yen gained 1.2 percent versus the dollar and 0.2 percent against the European currency.
The euro-dollar exchange rate swung less than 3 cents above and below $1.40 this month. Implied volatility on seven major currencies against the dollar dropped to 12.73 today, the lowest since October, indicating traders expect less price frustration in the foreign-exchange market in coming months.
Moving Sideways
“We are moving to sideways until September when gradual improvement in macro data adds to fresh momentum for dollar shorts,” said Mike Moran, a senior currency strategist at Standard Chartered in New York. A short position is a bet a currency will decline.
Investors should buy the U.S. currency against the yen, with a target above 105 per dollar, as Japan’s trade and investment flows deteriorates, Goldman Sachs Group Inc. said today in an e-mailed note.
The yen is the most overvalued currencies in the Group of 10 major currencies, and “neutral” market positioning allows investors to add more bets against the Japanese currency, according to Goldman. Trade and investment flows to Japan have turned from a surplus of 6 percent of its GDP, to a deficit of 5 percent of the economy, according to Goldman.

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