U.S. stocks fell from a five-year high and Treasuries rose after consumer confidence unexpectedly dropped, while the dollar fell to a one-week low against the euro as a report showed U.S. inflation is contained.
The Standard & Poor’s 500 Index (SPX) lost 0.2 percent to 1,560.72 after closing within two points of a record yesterday. The Dow Jones Industrial Average dropped for the first time in 11 days. Benchmark 10-year Treasury yields fell four basis points to 1.99 percent. The dollar depreciated 0.4 percent to $1.3061 per euro. Natural gas rose to the highest since November on speculation that a late cold blast will boost heating demand.
“When you get such a strong run and you couple that with it being at historical levels, then buyers are a little bit more wary of jumping in,” Wayne Lin, fund manager at Baltimore-based Legg Mason Inc., which oversees $654 billion, said in a phone interview. “Equities are fairly valued, but we’ve had a very strong run and there is a question out there as to what’s going on more fundamentally.”
The Thomson Reuters/University of Michigan preliminary sentiment index for March fell to 71.8 from 77.6 in February. The gauge was projected to increase to 78, according to the median estimate of 67 economists surveyed by Bloomberg.
Industrial production rose more than forecast in February as U.S. factories turned out more business equipment and motor vehicles. Output at factories, mines and utilities climbed 0.7 percent, exceeding the median projection in a Bloomberg survey, figures from the Federal Reserve showed today in Washington. Separate data showed manufacturing in the New York region expanded for a second month in March and industry managers grew more optimistic about the future.
Trading in S&P 500 stocks was about 43 percent above the 30-day average at this time of day.
The S&P 500 climbed yesterday to within two points of its record closing level of 1,565.15 set in October 2007. The gauge has more than doubled from its bottom in 2009, fueled by corporate earnings that topped estimates and monetary stimulus from the Federal Reserve.
JPMorgan Chase & Co. slid 1.9 percent after being asked to submit new capital plans to regulators in the wake of stress tests. Separately, a Senate investigation found that JPMorgan Chief Executive Officer Jamie Dimon misled investors and dodged regulators as losses escalated on a “monstrous” derivatives bet last year.
Bank of America Corp. gained 3.8 percent to the highest level since May 2011 after it won federal approval for a share buyback.
The Chicago Board Options Exchange Volatility Index (VIX), which measures the cost of using options as insurance against declines in the S&P 500, climbed 0.2 percent to 11.32. The gauge dropped yesterday to the lowest level since February 2007.
The dollar versus the euro touched the lowest level since March 8. The U.S. currency depreciated 0.8 percent to 95.39 yen. U.S. consumer prices increased 2 percent in the 12 months ended in February, after a 1.6 percent year-over-year gain the prior month, a Labor Department report showed today in Washington.
Fed policy makers indicated in December that an “exceptionally low” target interest rate is appropriate as long as inflation isn’t forecast to rise to more than 2.5 percent and unemployment stays above 6.5 percent.
Treasuries rose, dropping 10-year yields below 2 percent for the first time in six days. The Fed purchased $5.2 billion of Treasuries today due from December 2017 to November 2018 in a program to bolster economic growth. China increased its holdings of Treasuries in January by the most since 2011.
The Stoxx Europe 600 Index (SXXP) fell 0.4 percent. The index rose 0.6 percent this week, its fourth straight week of gains. The MSCI Emerging Markets Index slid for a fifth day, the longest losing streak in four months, dropping 0.6 percent.
The pound was little changed against the dollar, erasing earlier gains after Bank of England Governor Mervyn King said he sees an argument for bolstering the economic recovery by expanding quantitative easing.
“What I see are signs of a recovery, and I think there is a case for supporting that through additional asset purchases,” he said, according to the transcript of an interview with ITV News released today.
In the first part of the interview broadcast yesterday, King said policy makers aren’t trying to weaken the currency. Markets determine the level of exchange rate, “not us,” King said. Sterling gained as much as 0.6 percent earlier today.
Natural gas rose 1.6 percent to a 16-week high as Commodity Weather Group LLC said below-normal temperatures in northern states over the next five days will spread across the East from March 20 through March 29. Prices rose 3.6 percent yesterday after the government reported a bigger-than-expected supply drop.
West Texas Intermediate crude rose to a three-week high as inventories fell at a major storage hub and the dollar weakened. Futures for April delivery advanced 42 cents to $93.45 a barrel on the New York Mercantile Exchange, the highest settlement since Feb. 20. Prices gained 1.6 percent this week.
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