Treasuries Fall, Dollar Halts Drop; U.S. Stocks Pare Gain

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Traders work on the floor of the New York Stock Exchange. Close

Traders work on the floor of the New York Stock Exchange.

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Photographer: Scott Eells/Bloomberg

Traders work on the floor of the New York Stock Exchange.

Treasuries fell while the dollar snapped a five-day slump as growth in consumer spending boosted speculation the Federal Reserve will continue to reduce stimulus. U.S. stocks pared early gains, while industrial metals rose amid speculation China will do more to support growth.

Ten-year Treasury yields increased four basis points to 2.72 percent at 4 p.m. in New York and the Bloomberg Dollar Spot Index rose for the first time in six sessions, strengthening 0.1 percent. The Standard & Poor’s 500 Index added 0.5 percent to 1,857.62 after jumping almost 1 percent while the Nasdaq Composite Index erased most of a 1.3 percent advance.

Consumer spending in the U.S. rose in February by the most in three months as incomes increased, a sign that economic momentum was returning as Americans recovered from an unusually harsh winter. China has policies in reserve to deal with any economic volatility this year and can’t ignore “difficulties and risks” from a slowdown in the economy, Premier Li Keqiang said in a statement on the government’s website.

“We’ve had better data and that has been bond market negative today,” said Adrian Miller, director of fixed-income strategies at GMP Securities LLC in New York. “The ten-year note is straddling the line between optimism and cautiousness. Economic data has been better, and that is weighing on the market, but there is still a question about upcoming data.”

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Malaysian ringgit banknotes of various denominations are arranged for a photograph in Kuala Lumpur, Malaysia. Close

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Photographer: Sanjit Das/Bloomberg

Malaysian ringgit banknotes of various denominations are arranged for a photograph in Kuala Lumpur, Malaysia.

Yield Curve

Shorter-term borrowing costs rose after Federal Reserve Bank of Chicago President Charles Evans said the central bank will probably raise interest rates in the second half of next year. Policy maker have trimmed bond purchases at each of the past three meetings. The difference between five- and 30-year yields shrank to as little as 1.79 percentage points this week, the least since 2009. Bill Gross, manager of the world’s biggest bond fund, said core inflation of “only” 1.1 percent was overlooked by the market.

The S&P 500 rebounded today after falling for the fourth time in five days, as banks, consumer, commodity and technology companies led losses during the week. Investors had been selling the bull market’s biggest winners this week, locking in gains as they assess the strength of the U.S. economy and whether the situation in Ukraine will worsen.

Market Movers

Consumer-discretionary and energy shares led today’s rally in stocks after household purchases, which account for almost 70 percent of the economy, climbed 0.3 percent after a 0.2 percent gain in January that was smaller than previously estimated, Commerce Department figures showed. The median forecast of 79 economists in a Bloomberg survey called for a 0.3 percent gain. Incomes also increased 0.3 percent.

Americans were shaking off the effects of the coldest winter in four years as they ventured out to shop, supported by a job market that’s also picking up speed.

Separate data today indicated consumer confidence fell less than previously estimated in March. Reports next week include data on employment and manufacturing output in March, along with factory orders and construction spending from February.

“There is a better tone to the market,” Chris Gaffney, senior market strategist at EverBank Financial in St. Louis said by phone. “If consumers go back in and are confident enough to start spending again, that supports earnings and will certainly support the equity market.”

European Markets

The Stoxx Europe 600 Index rose for a fourth straight day, its longest rally in more than a month. The gauge trimmed its March decline to 1.3 percent, and is up 1.7 percent this quarter. Basic-resources companies paced today’s rally, and 18 out of 19 industry groups climbed.

The MSCI Emerging Markets Index advanced 1 percent to the highest level since Jan. 2. The index has rallied 4.2 percent this week, the largest advance since June. The Hang Seng China Enterprises Index of mainland shares listed in Hong Kong jumped 1.3 percent. The gauge climbed 6.1 percent this week, the most since China unveiled a sweeping reform package in November.

“Some of the bearish China bets have been taken off the table because of expectation that the Chinese authorities might come up with some stimulus,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. “The belief is that they’re coming with something and that should help to stabilize growth and prevent a hard landing.”

Ukraine Crisis

Russia’s Micex Index (INDEXCF) added 0.9 percent, trimming this month’s decline to 7 percent. Shares are headed for the biggest monthly losses since May 2012 after the West imposed sanctions on Russian officials following President Vladimir Putin annexation of Ukraine’s Crimea.

U.S. President Barack Obama today urged Russia to pull back troops from Ukraine’s border while Russia dismissed a United Nations resolution on its takeover of Crimea as “counter-productive.”

The U.S. House of Representatives is ready to impose more sanctions and give aid to Ukraine after the Senate passed the bill yesterday with broad bipartisan support. The House’s next opportunity to act on the measure would be in a session scheduled for 11 a.m. in Washington today.

Turkey’s benchmark gauge climbed 3.1 percent to the highest level in three months two days before local elections that will test support for Prime Minister Recep Tayyip Erdogan’s government.

Commodities Climb

Hungary’s BUX advanced for a fifth day, the longest run of gains since Jan. 14, climbing 2.3 percent. S&P raised the country’s credit-rating outlook.

The S&P GSCI gauge of 24 commodities added 0.2 percent, climbing for a sixth consecutive session for its longest rally since Feb. 19. Copper advanced 1.7 percent in London today and increased 2.9 percent in five days, capping the biggest weekly advance since September. Aluminum rose 1.2 percent to $1,758 a ton in London.

West Texas Intermediate oil increased 0.4 percent to $101.67 a barrel and is 3.3 percent higher for this year.

Greece’s 10-year yield fell 22 basis points to 6.67 percent. The nation is set to receive a commitment from euro-region authorities as soon as next week for a payment of 8.3 billion euros ($11.4 billion) in the next step in the country’s aid program, three officials familiar with the negotiations said.

To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Cordell Eddings in New York at ceddings@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeff Sutherland, Michael P. Regan

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