* In S&P 500, over 450 stocks end the year higher
* Equities expected to keep rallying in 2014
* Rise in bond yields to be tempered by deflation fears
* Euro near 2-year high vs dollar, may weaken in 2014
By David Gaffen
NEW YORK, Dec 31 U.S. stocks closed 2013 by
setting record highs and world equity markets ended at six-year
peaks on Tuesday, while benchmark bond yields posted their first
annual rise since 2009.
Ultra-easy monetary policies and an improving economic
outlook worldwide led to a stellar year for stocks. Equity
strategists see the gains continuing into 2014 as economic
growth improves even as the Federal Reserve steadily trims its
"This has been a terrific year, with all the concerns we had
in January proving unfounded, and with current economic growth
giving us a strong outlook for 2013," said John Carey, portfolio
manager at Pioneer Investment Management in Boston.
The S&P 500 benchmark ended its best year since 1997 with a
29 percent gain. More than 450 of the stocks in the index ended
the year higher, the most since S&P started collecting that data
in 1980. Japan's Nikkei ended the year up 56.7 percent
and European shares gained 16 percent.
MSCI's all-country world equity index was up
0.22 percent at 408.33, its highest level since late 2007. It
has gained 20 percent this year.
The Barclays U.S. Aggregate Index of investment-grade bonds
ended with its worst year since 1994, as interest rates rose in
anticipation of reduced Fed stimulus and higher-yielding stocks
attracted more investment flows.
Assets favored by investors in economic downturns took a
beating in 2013, with falling prices driving top-rated U.S. and
German bond yields to near their highest levels in around two
years and gold limping toward its worst annual
performance in three decades, losing more than 27 percent.
The yield on the U.S. 10-year Treasury note,
which sets the standard for global borrowing costs, has risen to
3 percent from 1.75 percent at the start of the year, but is
seen rising to only 3.35 percent in 2014. The 10-year note was
yielding 3.02 percent on Tuesday.
The Dow Jones industrial average rose 72.37 points,
or 0.44 percent, at 16,576.66. The Standard & Poor's 500 Index
was up 7.29 points, or 0.40 percent, at 1,848.36. The
Nasdaq Composite Index was up 22.39 points, or 0.54
percent, at 4,176.59.
Reuters polls show European stocks are expected to hit new
highs in 2014, while Chinese, U.S. and other major stock markets
are also seen posting solid gains.
Emerging markets have been a noted exception to the rally in
equities. MSCI's EM Index fell 5 percent in 2013 on
worries that cuts in global monetary stimulus could expose
economic imbalances and as funds return to the rich world.
Russian stocks hit eight-day lows after two deadly
attacks in less than 24 hours that raised security fears ahead
of the Winter Olympics.
EURO NEAR TWO-YEAR HIGH
The euro ended 2013 close to its highest level in two years
against the dollar. But a Reuters poll shows it is
expected to reverse its upward trend next year as the continued
soft stance of the European Central Bank contrasts with the
On Tuesday, the single currency inched down to $1.3756
, still up more than 4 percent for the year. The dollar
was slightly higher against the yen at 105.32, posting its
biggest annual gain against the yen in 34 years, with the
Japanese currency hit by the Bank of Japan's money-printing.
The easing of the euro zone crisis and signs of a pick-up in
economic activity even in the bloc's weakest states have offered
strong support to the euro and brought Italian and Spanish debt
yields down to just over half their crisis peaks.
In the oil market, U.S. oil futures ended down 87
cents to $98.42.