U.S. Stocks Rise on Bets of More Stimulus; Treasuries Pare Gains - Bloomberg

Aug. 3 (Bloomberg) -- U.S. stocks rose, reversing earlier losses and preventing the longest Dow Jones Industrial Average slump since 1978, as investors speculated the Federal Reserve will start another stimulus program. Treasuries 10-year notes erased gains, and the dollar slid.

Speculation the Fed will embark on a third round of asset purchases to stem off a recession grew after the Wall Street Journal said three former central bank officials support the approach. More than $2.3 trillion had been erased from the value of global equities since July 22, and Treasury yields set 2011 lows, amid concern the economic recovery is faltering. Service industries grew in July at the slowest pace since February 2010, the Institute for Supply Management said today.


Stocks recovered after the Wall Street Journal reported that former Fed officials Donald Kohn, Vincent Reinhart and Brian Madigan said the central bank should consider a third round of bond purchases to help the economy.

Quantitative Easing

The Fed may arrange a third round of quantitative easing, known as QE3, Gross said. The central bank purchased bonds to cap borrowing costs in the first two easing efforts. The Fed has also promised to keep the target for overnight bank lending low for an “extended period.” The Fed may need to consider signaling an even longer commitment to low interest rates, according to BlackRock’s Fisher, who is based in New York.

Investors are also awaiting a government employment report in two days, which economists forecast will show the U.S. added a net 85,000 jobs last month including a 115,000 boost to private-sector employment.
Oil fell 2 percent to $91.93 a barrel on the New York Mercantile Exchange. Gold futures rose 1.3 percent to a record $1,675.90 an ounce.

The MSCI Emerging Markets Index of stocks sank 2.2 percent, set for the lowest close in more than a month.