U.S. stocks dropped the most in three weeks while the dollar jumped to an almost eight-year high versus the yen after data from housing to manufacturing beat estimates, boosting the case for higher interest rates. Oil retreated.
The Standard & Poor’s 500 Index lost 1 percent by 4 p.m. in New York, its biggest slide since May 5. The Bloomberg Dollar Spot Index added 0.9 percent, while Treasuries rose on safety demand amid concern that Greece’s debt crisis will worsen. Brent crude slumped to a one-month low as gold futures settled 1.4 percent lower. Industrial metals also declined.
Orders for capital equipment in the U.S. rose for a second month, sales of new homes climbed more than forecast and a measure of regional manufacturing exceeded estimates, data Tuesday showed. The reports added to evidence of a recovery in American economic growth after a first-quarter slowdown and came after Federal Reserve Vice Chairman Stanley Fischer said rate increases will be driven by data. Chair Janet Yellen last week said that borrowing costs will be boosted this year.
“The looming Fed change is always out there,” Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion, said by phone. “You have a couple of items that could be considered good, things are looking better, the dollar is strong, basically it’s working against the market at the moment.”
The S&P 500 slipped from an all-time high on Friday after Yellen said it would be “appropriate” to raise rates this year if the economy improves, while adding that the pace of further increases will be gradual. U.S. equity markets were closed Monday for the Memorial Day holiday.
The U.S. stocks benchmark traded last week in its tightest range in six months as investors weighed data showing strength in the labor market against ongoing signs of weakness in manufacturing. Equities have fluctuated near records on speculation the Fed won’t raise rates on a timeline and pace that would snuff out economic growth.
Among stocks moving Tuesday, energy shares tumbled 1.6 percent to lead declines, while raw-material producers lost 1.2 percent. Time Warner Cable Inc. rallied 7.3 percent as Charter Communications Inc. agreed to buy the company.
“The market is kind of striking this in-between, wanting better economic data but then the flipside meaning the Fed is that much sooner to raising rates,” said Walter Todd, who oversees about $1 billion as chief investment officer for Greenwood, South Carolina-based Greenwood Capital. “I’m fine with that, with seeing better economic data and dealing with the implications.”
The dollar strengthened versus all 16 of its major peers, with the Brazilian real and Norwegian krone down at least 1.4 percent. The U.S. currency gained as much as 1.5 percent to 123.32 yen, its highest level since July 2007. The greenback added 1 percent to $1.0873 per euro, taking this year’s gain versus the 19-nation shared currency to 10 percent.
“The dominant thing is the dollar story,” said Esther Reichelt, a currency strategist at Commerzbank AG in Frankfurt. Fed policy makers “know that low rates are not without risk. They fear that if they wait too long they’ll have to hike faster in order to prevent overheating.”
Yields on 30-year Treasuries fell eight basis points, or 0.08 percentage point, to 2.90 percent, the lowest closing level since May 4. Shorter-term U.S debt was little changed after the U.S. sold $26 billion of two-year notes Tuesday.
German government bonds rose the most in a week amid the euro’s retreat.
Euro-area markets are on tenterhooks as Greece’s Syriza-led administration seeks bailout loans, with a payment due to the International Monetary Fund next month. The nation’s finance minister, Yanis Varoufakis, blamed creditors’ insistence on more austerity for the lack of a deal that would release the funds.
Ten-year Greek yields jumped 51 basis points to 11.88 percent. The Stoxx Europe 600 Index slipped 0.7 percent for a third day of declines and its longest losing streak in three weeks.
The MSCI Emerging Markets Index dropped 0.9 percent and a Bloomberg gauge of 20 currencies fell for a seventh day.
Gold futures fell to $1,185.60 an ounce, the lowest intraday level for a most-active contract since May 12, as the prospect of higher U.S. rates fueled dollar gains, curbing demand for the metal. Silver and platinum declined.
Brent crude futures fell 2.7 percent to settle at $63.72 a barrel in London after rising Monday for the third time in four days. It was the lowest settlement price since April 22 as investors weighed flaring Middle East violence against signs that a global oil glut will persist.
Copper for three-month delivery in London slipped 0.9 percent, reaching a three-week low amid concern demand in China -- the world’s biggest consumer of base metals -- will falter amid an economic slowdown. Nickel fell 0.3 percent and aluminum lost 0.9 percent.
The Bloomberg Commodity Index sank 1.7 percent Tuesday, closing at its lowest level since April 22.