Stocks climbed as Home Depot Inc. led a rally in retailers and Spanish bonds reversed losses, overshadowing concern about the budget debate in Washington. Treasuries trimmed gains while commodities retreated.
The Standard & Poor's 500 Index was up 0.3 per cent at 1,384.63 as of 1:35 p.m. in New York and the Stoxx Europe 600 Index finished 0.4 per cent higher, reversing a 0.8 per cent drop. Ten-year Spanish yields fell four basis points to 5.85 per cent on speculation the nation will ask for a bailout. Ten-year US yields lost less than one basis point to 1.59 per cent. The euro reversed losses versus the dollar while the S&P GSCI Index of commodities declined 0.6 per cent.
Home Depot led the Dow Jones Industrial Average higher as the company's better-than-estimated earnings showed the recovering housing market boosted spending on repairs. European shares also rebounded as Greek Finance Minister Yannis Stournaras told a European Parliament hearing that yesterday's euro-area meeting was "constructive" and he expects an accord to be reached on rescue funding at a Nov. 20 meeting.
"Home Depot did really well this morning, which is significant because it's another indicator that homebuilding is recovering," Randall Warren, who oversees $US75 million as chief investment officer of Warren Financial Service in Exton, Pennsylvania, said in a phone interview. "The fiscal cliff is holding the market back at this point."
Treasury 10-year note yields touched a two-month low earlier as trading resumed after the Veterans Day holiday. The difference between the yield on the two-year note and the 10- year security narrowed to the least in two months, signaling market anticipation of slower economic growth.
The S&P 500 is down almost 3 per cent since President Barack Obama was re-elected last week, setting up a showdown with the Republican-controlled House over the budget. Obama meets Democratic and Republican leaders in Congress this week. Lawmakers need to reach a deal in order to avert a $US607 billion "fiscal cliff" in spending cuts and tax increases starting in January, an outcome that many economists predict would cause a recession.
The economy is already being damaged by concern about the budget, said Brian Moynihan, president and chief executive officer of Bank of America Corp.
'Number One Issue'
"The impacts of the potential cliff are already being felt," Moynihan said. In the bank's survey of chief financial officers, "the number one issue they see is the fiscal cliff. They tell us it's affecting their business plan. That uncertainty continues to hold back the recovery. Simply put, our clients tell us they will not be aggressive in times of uncertainty."
A gauge of retailers in the S&P 500 rallied 1.5 per cent for the biggest gain among 24 groups as Home Depot jumped as much as 5.4 per cent to $US64.44, the highest price since 2000. Verizon Communications Inc., Coca-Cola Co. and Walt Disney Co. jumped more than 1 per cent to help lead gains in the Dow.
Microsoft Corp. dropped 3.6 per cent as Steven Sinofsky, a 23-year veteran who ran the Windows division, left the company. AK Steel Holding Corp. slid 15 per cent as it forecast a wider- than-expected fourth-quarter loss with a decline in prices for the last three months of the year.
Coffee, heating oil and Brent crude oil lost more than 1 per cent to lead declines in 17 of 24 commodities in the S&P GSCI Index. New York-traded oil slipped 0.6 per cent to $US85.08 a barrel after the International Energy Agency reduced demand estimates. Coffee futures tumbled the most in five weeks on signs of abundant global supplies. Sugar, cocoa and orange juice rose, while cotton dropped.
The dollar and yen rose versus most major peers after euro- area policy makers gave Greece two extra years to lower its budget deficit. The euro touched two-month lows against the dollar and Swiss franc as European finance ministers struggled to agree on how to provide additional aid for Greece. The euro erased losses and New Zealand's dollar climbed as the rally in US stocks fueled risk appetite. Brazil's real tumbled on bets the central bank will continue to intervene.
Among European stocks, EON AG slumped 9.8 per cent, the most in 15 months, after Germany's biggest utility lowered its earnings forecast for 2013. Vodafone Group Plc slid 2.5 per cent after the world's second-largest mobile-phone company posted service revenue that missed estimates and a 5.9 billion-pound ($US9.4 billion) writedown in Spain and Italy pushed the company into a first-half loss. Pirelli & C. SpA declined 2.8 per cent after the tiremaker cut its 2012 revenue target and raised its debt forecast.
German investor confidence unexpectedly declined in November, according to a report from the ZEW Center for European Economic Research in Mannheim. Its index of investor and analyst expectations fell to minus 15.7 from minus 11.5 in October. Economists forecast an increase to minus 10, according to the median of 43 estimates in a Bloomberg News survey.
The MSCI Emerging Markets Index lost 0.8 per cent as the Shanghai Composite Index dropped 1.5 per cent, while Taiwan's Taiex slid 1.8 per cent with trading volume 31 per cent higher than the 30-day average. South Korea's Kospi Index slipped 0.6 per cent.