U.S. stocks gained for a second day as energy shares climbed on a rebound in oil and Merck & Co. led drugmakers higher after a judge upheld a patent, helping the market erase an early drop triggered by a retreat in China. Ten- year Treasury notes rose, and the dollar fell against the euro.
Occidental Petroleum Corp. and Murphy Oil Corp. led gains in energy shares as crude rose to a two-month high after the Energy Department said U.S. inventories declined the most in more than a year. Merck climbed 2.5 percent for the top advance in the Dow Jones Industrial Average after a federal judge said Teva Pharmaceutical Industries Ltd. can’t make a copy of its asthma drug Singulair. Pfizer Inc. added 2.4 percent.
The Standard & Poor’s 500 Index increased 0.7 percent to 996.46 at 4:10 p.m. in New York. The Dow jumped 61.22 points, or 0.7 percent, to 9,279.16. Two stocks rose for each that fell on the New York Stock Exchange. Some 7.9 billion shares changed hands on all U.S. exchanges, 16 percent below the three-month daily average.
“The economy is doing a little better than people thought,” said Edward Hemmelgarn, who oversees about $350 million as president of Shaker Investments Inc. in Cleveland. “We might be using a little more oil. People are taking that as a positive indicator of the economy expanding. You get news like this and that tends to dampen fears and causes people to want to get back in.”
Energy shares in the S&P 500 climbed 1.9 percent collectively for the top gain among 10 groups after the government said oil stockpiles dropped 8.4 million barrels last week, the most since the week ended May 23, 2008. Crude for September delivery increased 4.7 percent to $72.42 a barrel. Prices are up 62 percent this year.
Occidental Petroleum advanced 2.9 percent to $71.53. Murphy Oil, the crude producer and refiner that operates filling stations at Wal-Mart Stores Inc., added 3.1 percent to $58.05.
Merck climbed 2.5 percent to $31.48, its highest price since October. U.S. District Judge Garrett E. Brown Jr. in Trenton, New Jersey, rejected Teva’s arguments that the patent on the main ingredient of Singulair is invalid or unenforceable. The judge said Teva can’t sell a generic version of the medicine, which had 2008 sales of $4.3 billion.
Freeport-McMoRan Copper & Gold Inc. led a group of material producers in the S&P 500 to a 1.1 percent gain, the steepest among 10 groups after energy and health-care shares. Gold rebounded as the dollar’s decline enhanced its allure as an alternative investment. Gold futures for December delivery gained $5.60, or 0.6 percent, to $944.80 an ounce in New York. Freeport-McMoRan added 2.7 percent to $62.09.
‘Hopes on China’
Global stocks tumbled earlier today on concern a potential rebound in corporate earnings and economic growth will falter. China’s Shanghai Composite Index slumped as much as 5.1 percent, extending its drop from a 2009 high to more than 20 percent, the common definition of a bear market. It ended the day down 4.3 percent.
“People are hanging their hopes on China pulling us out of a recession,” said Brad Brooks, senior money manager at Value Line Securities, which oversees $2.5 billion in New York. “China’s growth looks great, but things may be a bit overstated. There has been a lot more integration of global markets over the past couple of years.”
Treasuries rose, pushing 10-year yields to near a five-week low, as a tumble in Chinese stocks spurred investors toward the relative safety of government securities.
Ten-year notes rose even as U.S. stocks reversed earlier losses and gained for a second day. The Federal Reserve bought $2.599 billion of Treasuries due from February 2021 to February 2026 today, part of its plan to cap consumer borrowing costs. Goldman Sachs Group Inc. said demand for Treasuries will be “enough” to cover the government’s record sales of debt.
“It’s still a very uncertain environment,” said Christopher Sullivan, who oversees $1.5 billion as chief investment officer at United Nations Federal Credit Union in New York. “The economy is getting better, but the bond market is seeing the pace of recovery as further out than earlier anticipated and is comfortable with the inflation outlook.”
The yield on the 10-year note fell five basis points, or 0.05 percentage point, to 3.46 percent at 4:24 p.m. in New York, according to BGCantor Market Data. The rate touched 3.40 percent, the lowest since July 14. The 3.625 percent security maturing August 2019 rose 3/8, or $3.75 per $1,000 face amount, to 101 11/32.
The dollar dropped versus the euro as the rebound in U.S. stocks eased investor demand for safety triggered by a tumble in Chinese shares.
The yen and Swiss franc gained against currencies including the New Zealand dollar as the Shanghai Composite Index briefly fell into a bear market. Sterling weakened versus the euro after minutes of the Bank of England’s policy meeting showed Governor Mervyn King favored a bigger increase in asset purchases.
“In the longer term, medium term, we think it’s a risk- friendly environment,” said Achim Walde, head of currencies at Oppenheim KAG in Frankfurt, where he helps oversee 3 billion euros ($4.3 billion) in assets. “We should see an upward revision in growth.”
The dollar declined 0.7 percent to $1.4233 per euro at 4:04 p.m. in New York, from $1.4136 yesterday. The yen appreciated 0.7 percent to 94 per dollar, from 94.69, after trading at 93.67, the strongest level since July 23. The yen was little changed at 133.80 per euro after touching 132.20, the strongest level since July 22.