Treasuries and U.S. stocks fell, pulling U.S. benchmark equity indexes down from almost four-year highs, while the dollar rose after Federal Reserve Chairman Ben S. Bernanke’s remarks to Congress damped speculation of more quantitative easing to help the economy.
The Standard & Poor’s 500 Index slipped 0.5 percent to 1,365.68 at 4 p.m. in New York after rising as much as 0.4 percent in the first half hour. Ten-year U.S. Treasury yields increased three basis points to 1.98 percent, reversing an early drop, and the Dollar Index rose 0.7 percent. Gold futures sank 4.3 percent to $1,711.30 an ounce, the biggest loss of the year. Oil rose 0.5 percent to $107.07 a barrel, erasing early losses.
The S&P 500 trimmed its February advance to 4.1 percent, its third straight monthly gain. While Bernanke told Congress that keeping monetary stimulus is warranted, he said rising gasoline prices are likely to push up inflation temporarily and the drop in the unemployment rate has been more rapid than expected. The U.S. economy expanded at a 3 percent annual rate in the fourth quarter, more than forecast, and the Fed’s Beige Book survey said that manufacturing continued to expand at a “steady pace” in January and early February.
“The market is interpreting what Bernanke said as no more QE,” said Paul Horrmann, a broker in New York at Tradition Asiel Securities Inc., an interdealer broker. “That’s why the markets came off.”
Hewlett-Packard Co., Alcoa Inc. and Bank of America Corp. fell more than 1.6 percent to lead declines among 21 of 30 stocks in the Dow Jones Industrial Average, while Coca-Cola Co. and Home Depot Inc. had the biggest gains. The Dow retreated 53.05 points, or 0.4 percent, to 12,952.07 after yesterday exceeding 13,000 the first time since May 2008.
‘Far From Normal’
Yields on 30-year Treasury bonds increased one basis point to 3.09 percent and two-year rates rose less than one point to 0.30 percent. The dollar strengthened against 10 of 16 major peers, rising 1 percent to $1.3327 against the euro after reversing an early 0.2 percent retreat.
While describing “positive developments” in the labor market, Bernanke said “the job market remains far from normal” during the first day of his semi-annual monetary policy report to Congress.
Bernanke’s remarks “were most notable for what he did not say,” according to a note to clients from Goldman Sachs Group Inc.’s chief economist, Jan Hatzius. “The Chairman gave no clear signal that the committee is considering further monetary easing in the near future.”
Oil Halts Slide
The S&P GSCI Index was little changed, reversing a 1.4 percent drop as oil rebounded from early losses. Silver, gold and lead fell more than 4 percent to lead declines, while natural gas and hogs rose more than 1 percent for the biggest gains among 24 commodities. Oil in New York rose for the first time in three days, reversing a decline in the last half-hour of floor trading, to cap the first monthly gain in three.
U.S stocks extended a global rally earlier after the European Central Bank provided lenders with a larger amount of cash than forecast. The ECB allotted 529.5 billion euros ($712 billion) in three-year funds. Economists predicted 470 billion euros, a Bloomberg survey showed.
“It’s stopped the fears about systemic risk,” Patrick Legland, head of research at Societe Generale SA, said in a Bloomberg Television interview about the ECB loans. “This is very good. What we need is step two -- additional measures to support the economy. This is a movement in the right direction.”
European Stocks, Yields
The Stoxx Europe 600 Index ended little changed, erasing a rally of as much as 0.8 percent. ITV PLC, the U.K.’s largest commercial terrestrial broadcaster, jumped 6.8 percent for its biggest rally in a year after profit topped estimates on growth in services that rely less on advertising. Aberdeen Asset Management Plc slumped 5 percent as Credit Suisse Group AG sold shares in the company.
The yield on the 10-year Italian bond fell 16 basis points to 5.19 percent. The German 10-year bund yield added two basis points to 1.82 percent as the nation sold 3.26 billion euros of the securities.
Portugal’s 10-year yield surged 73 basis points to 13.75 percent, an almost one-month high. The ECB was said to purchase government bonds for the first time in two weeks, buying short-dated Portuguese securities after they underperformed euro-area peers. The ECB’s purchases were small, according to two people with knowledge of the transactions, who declined to be identified because the trades are confidential. A spokesman for the ECB declined to comment.
Jean-Claude Juncker, who leads the group of euro-area finance ministers, said Portugal’s chiefs told him they won’t need to seek a new bailout.
Default Swaps, Euro
The cost of insuring against default on sovereign debt rose, with the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments increasing 1.9 basis point to 344.
The euro weakened against all 16 major peers except the Brazilian real, Swiss franc and Japanese yen.
The MSCI Emerging Markets Index rose 0.9 percent, headed for the highest closing level since Aug. 3. The gauge has jumped 5.8 percent in February, its second consecutive monthly increase. Benchmark indexes gained more than 1 percent in Russia, South Korea, Indonesia and the Philippines. The Shanghai Composite Index dropped 1 percent on concern the government will retain measures to curb gains in housing prices this year. Asustek Computer Inc. jumped 7 percent in Taipei, helping the Taiex Index gain 2 percent, after saying notebook shipments will increase 22 percent this year.