Stocks & Bonds: Surge in Commodities Prices Helps End Slump on Wall St.

Mining companies and others dealing in commodities helped pull the stock market out of a three-day slump on Thursday.

News that China’s trade rebounded last month signaled the end of a six-month slowdown for the world’s biggest buyer of raw materials. The report drove prices up for copper and other commodities, and that helped lift Newmont Mining, Freeport-McMoRan and other stocks in the materials industry.

“The one thing that stands out today is the better news out of China,” said David Joy, the chief market strategist at Ameriprise Financial. “It comes as a pleasant surprise.”

The Standard & Poor’s 500-stock index edged up 6.57 points, or 0.4 percent, to 1,697.48.

The Dow Jones industrial average rose 27.65 points, or 0.2 percent, to 15,498.32. The Nasdaq composite gained 15.12 points, or 0.4 percent, to 3,669.12.

With little other news to drive trading, the stock market had meandered lower this week. The S.& P. 500 fell three days straight and remains down 0.7 percent for the week. It is still up 19 percent this year.

Brad McMillan, chief investment officer for Commonwealth Financial Network in Waltham, Mass., said a number of concerns weighed on the market this week. Comments from Federal Reserve officials have convinced many investors that the bank will begin pulling back its support for the economy in the coming months.

In an interview on CNBC after the market closed, Richard W. Fisher, head of the Fed’s Dallas branch, reaffirmed his view that it was time to wind down the bank’s stimulus effort.

At the same time, companies are warning of slower sales and turning in tepid second-quarter results. Mr. McMillan said it was starting to look as though corporate earnings had not kept up with the stock market’s strong pace this year.

“I think people are realizing that stock values are getting disconnected from earnings growth,” Mr. McMillan said. “For the rally to continue, people will have to pay more for earnings that aren’t growing that much.”

Investors are paying more for profits. A year ago, the price-earnings ratio for the S.& P. 500 was 13.4, according to the data provider FactSet. Now it is 15.6, which is still near the long-run average.

In other trading on Thursday, the better economic news out of China sent copper, widely used for electronics and to wire buildings, up 10 cents, or 3 percent, to $3.27 a pound. Gold rose $24.60, or 2 percent, to $1,309.90 an ounce.

In the bond market, the price of the 10-year Treasury note rose 10/32, to 93 1/32, while its yield fell to 2.59 percent, from 2.60 late Wednesday.

JPMorgan to Exit Physical Commodities Trading

Wall Street's biggest bank said an "internal review" had concluded it should pursue "strategic alternatives" for its physical commodities operations, which includes assets like its Henry Bath metals warehousing subsidiary and a team of physical power and oil traders in Houston and New York.

The firm will explore "a sale, spinoff or strategic partnership" for its physical arm, the statement said, adding the bank remained "fully committed" to its traditional financial commodity business, including trading derivatives and its activities in precious metals.

The bank's announcement follows a week of unprecedented scrutiny of Wall Street's commodity operations, after the U.S. Federal Reserve said last Friday it was reviewing a landmark 2003 decision that allowed commercial banks to trade in physical markets to "complement" their financial activity.

JPMorgan has also faced additional pressure from a power market manipulation scandal in California and the Midwest, with reports suggesting the bank will soon pay a near record $410 million settlement with the U.S. Federal Energy Regulatory Commission (FERC).

The Department of Justice and the U.S. Commodity Futures Trading Commission have also both launched probes into the metal warehousing businesses owned by Wall Street banks and other large physical traders, which have been accused of driving up metals prices.

The abrupt move marks a sharp reversal for the bank that had pushed aggressively into the sector since 2008, when it first acquired a host of physical trading assets and expertise through its acquisition of Bear Stearns during the financial crisis.

That was followed by the acquisition of RBS Sempra Commodities in 2010, allowing the bank to quickly challenge Goldman Sachs and Morgan Stanley for the title of largest commodity business on Wall Street.

A spokesman for JPMorgan did not immediately return a call seeking comment.

The decision will also bring questions about the next move for Blythe Masters, the architect of JPMorgan's growth in commodities and one of the most famous women on Wall Street.

JPMorgan shares were down 1 percent at $55.97 in late afternoon trading on Friday.

(Additional reporting by Jonathan Leff in New York, Avik Das and Aman Shah in Bangalore; Editing by Sriraj Kalluvila and Phil Berlowitz)