Treasuries rose, trimming the biggest monthly drop in more than a year, after an auction generated higher-than-average demand. The dollar strengthened against most major counterparts, and the Standard & Poor’s 500 Index fell from an almost four-year high.
Ten-year Treasury yields lost seven basis points to 2.18 percent at 4 p.m. in New York, paring the monthly gain to 21 basis points. The dollar added 0.3 percent to $1.3323 per euro as it strengthened versus 14 of 16 major counterparts. The Standard & Poor’s 500 Index slipped 0.3 percent to 1,412.52 after closing at the highest level since May 2008 yesterday. The Nikkei 225 Stock Average erased losses from last year’s earthquake. Natural gas slumped to a 10-year low on speculation government data this week will show a growing surplus.
Treasuries gained as the government sold $35 billion of two-year securities. Federal Reserve Chairman Ben S. Bernanke signaled yesterday he will continue to stimulate the economy. The economic recovery is not yet assured and unemployment remains too high, Bernanke told ABC News anchor Diane Sawyer, according to transcripts of the interview released after the close of markets today.
“The auction went very well, and should extend to the rest of the week’s auctions given the sentiment,” said Suvrat Prakash, an interest-rate strategist in New York at BNP Paribas Securities SA, a primary dealer obliged to bid at Treasury offerings. “There is less risk appetite, which is beneficial for bonds. Going into quarter-end and month-end, there is more reluctance to take on risk position because people want to pay it safe.”
The Treasury auction drew a yield of 0.340 percent, compared with a forecast of 0.349 percent in a Bloomberg News survey of seven of the Federal Reserve’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.69, versus an average of 3.53 for the past 10 sales.
U.S. 30-year bonds advanced also, sending yields down four basis points to 3.30 percent. Pacific Investment Management Co.’s Bill Gross said continued credit expansion by central banks will produce accelerating global inflation and slower growth. Two-year yields fell three basis points to 0.32 percent.
Among U.S. stocks, Bank of America Corp. slipped 3.3 percent after its shares were downgraded by Robert W. Baird & Co. Apollo Group Inc., the biggest U.S. for-profit college company, slumped 8.5 percent amid concern over new enrollments. Lennar Corp., the third-largest U.S. homebuilder by revenue, advanced 4.7 percent as earnings exceeded projections.
The S&P 500 has climbed about 12 percent since the end of last year, poised for the best first quarter since 1998, amid better-than-forecast earnings and economic data. Financial companies and computer makers rose the most among 10 groups, with gains of more than 21 percent so far this year.
Investors chasing gains in stocks may help drive the S&P 500 to 1,440 in coming weeks while leaving the market vulnerable to losses once the so-called “window dressing” is over, UBS AG said.
Peter Lee, the New York-based chief technical analyst for UBS, said fund managers’ purchases of the best-performing stocks at the end of the quarter are likely to push the S&P 500 toward his 2012 target range of 1,440 to 1,450 sooner than the second half of the year, as he had anticipated. A failure of the benchmark index to hold gains above these levels may trigger a pullback of 5 percent to 10 percent, he said.
A gauge of homebuilders in S&P indexes rose 2.9 percent today, the most in two weeks. Home prices in 20 U.S. cities dropped at a slower pace in January, pointing to stabilization in the housing market. The S&P/Case-Shiller index of property values in 20 cities fell 3.8 percent from a year earlier, matching the median forecast of 32 economists surveyed by Bloomberg News, after decreasing 4.1 percent in December.
The Conference Board’s confidence index dropped to 70.2 from a revised 71.6 reading in February that was higher than initially reported.
“It’s far too early to declare victory,” Bernanke said, according to a transcript of the interview provided by ABC. “The recent news has been good. But I think we need to be cautious and make sure this is sustainable.” He added that the Fed can’t yet be “completely confident that we’re on a track to full recovery.”
Federal Reserve Bank of Dallas President Richard Fisher said the U.S. central bank has “done its job” to provide liquidity when it was needed and that the economy now needs Congress to indicate a clearer plan for taxes and spending.
Sovereign Wealth Funds
In Europe, Royal Bank of Scotland Group Plc climbed 3.3 percent after two people with knowledge of the situation said the U.K. government held talks with investors, including Middle Eastern sovereign wealth funds, about a sale of part of its stake. The U.K. said it will only sell its majority holding in RBS when it has obtained maximum value for taxpayers.
Finmeccanica SpA (FNC) surged 11 percent as Il Sole 24 Ore said Hitachi Ltd. is in talks to buy stakes in Ansaldobreda SpA and Ansaldo STS SpA from Italy’s biggest arms company. Finmeccanica is scheduled to report earnings after the close of trading today. Hochtief AG fell 5.3 percent as trading in its Australian subsidiary, Leighton Holdings Ltd., was halted before a quarterly review.
A measure of French sentiment jumped to 87 in March from 82 in February, national statistics office Insee reported in Paris today. That’s the highest since July. Economists forecast an unchanged reading, the median of 16 estimates in a Bloomberg survey showed.
The pound strengthened against 12 of 16 major peers and the yield on the 10-year gilt lost seven basis points to 2.26 percent. Bank of England policy maker David Miles said yesterday that spare industrial capacity will subdue domestically generated inflation, boosting the case for further bond purchases.
The IMF cut in January its forecast for the global economy this year to 3.3 percent growth, with the U.S. expanding 1.8 percent and the euro area contracting 0.5 percent.
“We’ve not changed the assessment of the baseline of the world economy,” David Lipton, first deputy managing director of the IMF, said in Seoul today. “We expect modest growth in the U.S., mild recession in Europe and a continuation of a comfortable level of growth in Asia with a soft landing in China.”
The yield on 10-year German bunds fell seven basis points to 1.89 percent. The 10-year Italian bond’s rate rose nine basis points to 5.12 percent while the yield on similar-maturity Spanish debt climbed two basis points to 5.35 percent. Italy sold about 2.82 billion euros of two-year zero-coupon bonds, while Spain sold 2.58 billion euros ($3.44 billion) of three-and six-month bills compared with a maximum target of 3 billion euros.
The cost of insuring sovereign debt fell after European Central Bank President Mario Draghi said euro-region governments should continue to take “decisive measures” after the central bank’s liquidity provisions helped restore investor confidence.
Chancellor Angela Merkel said Germany may back plans for the temporary and permanent euro-area rescue funds to run in parallel. European finance ministers will meet on March 30 to discuss raising a 500 billion-euro ($664 billion) ceiling on the region’s financial firewall.
Japan’s Nikkei 225 Stock Average (NKY) jumped 2.4 percent, erasing losses from last year’s earthquake and nuclear disaster as $241 billion in reconstruction spending and central bank efforts to devalue the yen combined to boost the country’s biggest companies. Sony Corp., the country’s largest exporter of consumer electronics, climbed 3.1 percent.
Natural Gas Slumps
Natural gas helped lead losses among 15 of of 24 commodities tracked by the S&P GSCI index, falling as much 2.3 percent to a 10-year low of $2.176 per million British thermal units, before an Energy Department report on March 29 about stockpiles. Arabica coffee surged 4.8 percent, the biggest gain among S&P GSCI materials, on concern that adverse weather will hurt crops in Brazil, the world’s largest producer.
Emerging-market stocks advanced the most in two weeks after South Korea’s consumer confidence improved. The MSCI Emerging Markets index climbed 1 percent, the Hong Kong Hang Seng index gained 1.8 percent, South Korea’s KOSPI (KOSPI) increased 1 percent and India’s Sensex added 1.2 percent.
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