Global shares climbed to two-week highs on Thursday as strong corporate earnings offset weak U.S. economic data but concerns about Spain's financial troubles drove the euro broadly lower.
Commodities rallied, with oil prices hitting eight-week highs as Middle East tension stoked supply worries. Corn and soybeans soared to record highs after a worsening U.S. farm-belt drought raised worries about a possible food crisis.
On Wall Street, the S&P 500 index rallied to a fresh 2-1/2-month peak, lifted by a strong full-year outlook from IBM (IBM.N), bullish earnings from eBay (EBAY.O) and Qualcomm's (QCOM.O) expectations for a strong December quarter. European equities hit four-month highs also on strong corporate results.
The positive sentiment was tempered, however, by weaker-than-expected readings on U.S. manufacturing, housing and labor markets. Adding to investor concern was a spike in Spain's borrowing costs, which intensified fears Madrid may eventually need a full-blown sovereign bailout.
It is baked into stock prices that growth is going to be slow for a little while, said Giri Cherukuri, head trader at OakBrook Investments in Lisle, Illinois.
People are focusing on individual stocks after earnings and trying to figure out (through) outlooks how weak the economy really is, he said.
The Dow Jones industrial average .DJI rose 28.19 points, or 0.22 percent, to 12,936.89. The S&P 500 Index .SPX added 3.83 points, or 0.28 percent, to 1,376.61. The Nasdaq Composite Index .IXIC gained 24.88 points, or 0.85 percent, to 2,967.48.
The MSCI world equity index .MIWD00000PUS gained 0.8 percent to 315.08. European shares .FTEU3 rose 1 percent to end at 1,064.47.
French industrial conglomerate Alstom (ALSO.PA), Biotech company Actelion (ATLN.VX), home appliances maker Electrolux (ELUXb.ST) and AkzoNobel (AKZO.AS) all reported strong results.
The euro fell 0.1 percent to $1.2277. It also hit a record low against the Australian dollar and a 3-1/2-year trough versus sterling.
Ten-year Spanish bond yields rose above the 7 percent line seen as unsustainable after the country paid euro-era record yields for five-year funding as investors remain concerned about its finances and growth prospects.
The risk is that yields could start rising also in shorter maturities, where Spain is doing most of the funding, and that will basically be game over for Spain, said Gianluca Ziglio, a strategist at UBS.
Germany warned that Spain's financial troubles are far from over and its government should be ultimately responsible for European aid to its banks. Finance Minister Wolfgang Schaeuble said the mere perception of insolvency risk in Spain could cause contagion in the euro zone.
Brent crude gained for a seventh straight day, rising $2.71 to $107.87 a barrel after an earlier high of $108.18, while U.S. oil gained $2.86 to $92.73.
The killing of several Syrian security chiefs on Wednesday and a deadly attack on Israeli tourists in Bulgaria, which Israel accused Iran of carrying out, fueled worries over the Middle East, source of more than a quarter of the world's oil.
Spot gold rose to $1,582 an ounce, following a rally in oil prices.
Chicago Board of Trade spot September corn hit a record high $8.12 per bushel. August soybeans posted a record peak at $17.46-1/2. The month-long rally was fueled by fears of a food crisis similar to that in 2008, when riots broke out in some countries.
I hesitate to use those words (food crisis) but the circumstances are more severe now than they were in 2008, said Dennis Gartman, a commodity trader and editor/publisher of The Gartman Letter.
A rally in stocks eroded safe-haven demand for U.S. government debt. The benchmark 10-year U.S. Treasury note was down 6/32 in price, yielding 1.5145 percent.
Factory activity in the U.S. Mid-Atlantic region contracted for a third straight month in July and the number of Americans filing new claims for jobless aid surged last week, data showed on Thursday. A separate report showed U.S. home resales fell to the lowest level in eight months in June.
While we believe that economic conditions have not deteriorated sufficiently to push the Federal Reserve over the edge, the odds of further policy action being taken in the near term have clearly risen, said Millan Mulraine, senior macro strategist at TD Securities in New York.