Nasdaq Composite Rises to 14-Year High; Gold Advances

New York (Dec 26)  U.S. stocks extended a rally, as the Nasdaq Composite (CCMP) Index climbed to the highest since March 2000 and the Russell 2000 Index reached a record, on one of the slowest trading days of the year. Precious metals advanced, while oil capped a fifth weekly loss.

The Standard & Poor’s 500 Index added 0.3 percent to a record at 4 p.m. in New York, and the Russell 2000 jumped 0.7 percent to top its March high. The Nasdaq Composite rose 0.7 percent. Gold advanced 1.9 percent and silver gained the most since Dec. 9. Natural gas futures slipped below $3 per million British thermal units for the first time since 2012 and settled at the lowest in 27 months. U.S. crude slid to cap a fifth weekly loss. The ruble weakened 1.9 percent, while the Micex Index increased 0.7 percent.

Equity markets advanced this week, and U.S. stocks regained their losses from earlier this month, with the Dow rising seven straight days to close above 18,000. The ruble capped its first weekly advance in a month amid speculation the government is ordering exporters to sell foreign currency. Most markets in Europe and Asia are shut today for Boxing Day, while the U.S. reopened after the Christmas holiday. About 3.3 billion shares changed hands today, the slowest full-day of trading this year.

“We’ve had quite a run here,” Eric Cinnamond, who manages the $691 million Aston/River Road Independent Value Fund, said by phone from Louisville, Kentucky. “The consensus has been that the domestic economy is improving and small-caps are more exposed to that than large-cap multinational companies. Managers are making sure they’re owning what’s working and the herd mentality is at extremes right now.”

December Gains

U.S. stocks recovered losses from earlier this month as the Federal Reserve said it will be patient on the timing of interest-rate increases and the U.S. economy expanded at the fastest pace in more than a decade. Both the S&P 500 and the Dow are trading at records. The Dow has risen for seven days in its longest rally since March 2013.

The S&P 500 has advanced 0.9 percent this week, while the Dow is up 1.4 percent and the Russell 2000 has gained 1.6 percent. The Nasdaq Composite rose 0.9 percent in the week.

The small-cap and technology gauges have shown resilience this year, recovering from a correction that saw it slip 11 percent over a five-week period starting in early September. The index has surged 16 percent since reaching a one-year low on Oct. 13.

Even with its 4.4 percent gain in 2014, the Russell still trails the S&P 500, which has climbed 13 percent. The Dow has increased 9.1 percent year-to-date.

Russell Record

“Momentum has been building in the last month for small-cap names,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said by phone on Dec. 24. ‘It’s merely playing catch up. Given that the Russell has lagged through this year, people are trying to find beta for performance.’’

It hasn’t been a smooth year for the index. The gauge lost 2.8 percent over a three-day period starting July 15 after the Federal Reserve expressed concern about valuations among social-media and biotech companies.

“Valuation metrics in some sectors do appear substantially stretched -- particularly those for smaller firms in the social-media and biotechnology industries,” the central bank wrote in assessing the U.S. stock market.

The Fed’s concern came after small-caps and Internet shares were the biggest victims of a market retreat early in the year as investors dumped the best performers of the bull market.

Nasdaq Rally

The Nasdaq Composite closed below 4,000 twice this year, on Feb. 3 and April 11. It has rallied 20 percent to the highest since March 29, 2000. The gauge is now 4.7 percent below its all-time closing high of 5,048.62, set on March 10, 2000. The Nasdaq 100 Index, which jumped 0.9 percent today, is less than 20 points away from reaching a 14-year high.

Small-cap shares also fell faster than the broader market during an August selloff sparked by concern that a selloff in oil prices and slowing growth in China and Europe would hurt the U.S. economy.

The MSCI All-Country World Index rose 0.3 percent today and has climbed 0.8 percent this week.

West Texas Intermediate crude for February delivery fell $1.11, or 2 percent, to $54.73 on the New York Mercantile Exchange. Prices were down 3.2 percent this week.

Brent for February settlement slipped 1.3 percent to $59.45 a barrel in London.

“That the U.S. recovery is on firmer ground amid a ‘patient’ Fed is buoying sentiment towards risk assets further,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, wrote in an e-mail. “However, trading is thin and one shouldn’t read too much into this rally -- not least given the risk of a further slide in oil prices and the plethora of risks in emerging markets, in particular Russia.”

Gas Futures

Natural gas for January delivery fell 2.3 cents, or 0.8 percent, to settle at $3.007 per million Btu on the New York Mercantile Exchange, sliding on speculation that record production will overwhelm demand for the heating fuel.

Futures have slid 29 percent this year, heading for the first annual decline since 2011, as mild weather leaves stockpiles at a surplus to year-ago levels for the first time in two years.

Gold, Silver

Gold futures rose 1.9 percent to settle at $1,195.30, the most in more than two weeks, amid speculation that China, the world’s biggest consumer, will take more measures to bolster the economy, boosting demand for the precious metal as a store of value.

Silver futures for March delivery rose 2.8 percent to $16.147 an ounce. The price has declined 17 percent this year.

The dollar strengthened 0.4 percent versus the euro, taking the U.S. currency up for a second week.

The rate on 10-year Treasuries slipped two basis points to 2.25 percent. The extra yield on the 30-year debt over five-year notes shrank to a six-year low in Asia after declining oil prices spurred speculation that inflation will slow, fueling demand for longer maturities.

The ruble earlier rose as much as 1.7 percent against the dollar. It’s advanced about 9 percent this week as companies made year-end tax payments and the government ordered exporters including OAO Gazprom to sell foreign-exchange revenue.

“Exporters have to sell, and while volumes aren’t that large, it’s enough to move this thin market,” Iskander Abdullaev, analyst at Sberbank CIB, said in e-mailed comments. “I think there was an instruction to calm down the rate until the end of the year, so that retail clients don’t panic before holidays, and take off pressure from the ruble.”

Russia’s benchmark stock index fell 2.2 percent in the five days for its fifth weekly drop, the longest streak since June 2013.

Source: Bloomberg