Treasuries Halt Six-Day Drop, Dow Sets Another Record
Treasuries rose for the first time in seven days while Britain’s pound touched the lowest level since 2010 versus the dollar after U.K. industrial production unexpectedly declined. Most U.S. stocks fell, even as the Dow Jones Industrial Average climbed to another record.
Ten-year U.S. note yields decreased four basis points to 2.02 percent at 4 p.m. in New York and the yen climbed 0.3 percent against the dollar, paring an earlier 0.7 percent gain. The pound trimmed losses after weakening as much as 0.6 percent to $1.4832. The Standard & Poor’s 500 Index (VIX) slipped 0.2 percent as three U.S. stocks fell for every two that rose. Industrial metals led commodities higher and gold futures rose for a fourth straight day, the longest rally in six months, amid speculation central banks will expand stimulus.
The Dow swung between gains and losses throughout the day before ending higher for an eighth straight day, its longest streak in two years. European Union leaders will meet in Brussels for a summit on March 14-15 to discuss rescue plans for Cyprus. Treasuries remained higher after the U.S. auctioned $32 billion in three-year notes.
“The Fed isn’t going to move any time soon, and that means we aren’t going to stray far from these levels which support the front end of the yield curve,” saidAdrian Miller, director of fixed-income strategies at GMP Securities LLC in New York. “And the recent backup in yields brought buyers in as well.”
The Federal Reserve has kept its benchmark interest-rate target at zero to 0.25 percent since 2008 to support the economy. Chairman Ben S. Bernanke said March 2 that premature increases would “carry a high risk of short-circuiting the recovery.”
Thirty-year U.S. bonds also snapped a six-day slide, sending yields down five basis points to 3.21 percent. The three-year securities sold today drew a yield of 0.411 percent, compared with an average forecast of 0.413 percent in a Bloomberg News survey of seven of the Federal’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 3.51, versus a 3.61 average at the past 10 sales. Treasuries fell for the previous six days as stronger-than-forecast U.S. economic data damped safety demand.
The S&P 500 (SPX) yesterday rose to within nine points of its 2007 record. Among its 10 main groups today, gauges of technology, industrial and financial shares dropped more than 0.5 percent to lead losses while telephone and health companies rose. The Dow rose 2.77 points to 14,450.06 today, its sixth straight record.
Citigroup Inc. lost 1.4 percent, retreating from a two-year high, and the KBW Bank slipped from the highest level since April 2010.
A planned international limit on bank indebtedness will be on the agenda of every meeting of the Basel Committee on Banking Supervision this year as regulators seek to wean lenders off their addiction to debt, according to three people familiar with the talks. Regulators are preparing to fight lenders over the details of the so-called leverage ratio as they seek to toughen rules on the minimum amount of capital they must use to back their investment. The Basel group will meet tomorrow.
Yum! Brands Inc. (YUM) rallied 1.3 percent today after the owner of the KFC restaurant chain said first-quarter same-store sales fell less than estimated as its reputation rebounded from a probe of a former chicken supplier. Merck & Co. jumped 3.2 percent after saying it will continue a study of its cholesterol-lowering drug Vytorin, easing investor concern the drug may pose a risk to patients.
More than $10 trillion has been restored to U.S. equity values during the four-year bull market as the S&P 500 more than doubled from the bottom in 2009, fueled by corporate earnings that topped estimates and monetary stimulus from the Federal Reserve. The Dow recouped all its losses from the financial crisis in less than 65 months, more than a year faster than the recovery from the Internet bubble.
“After setting new all-time highs for several consecutive days, the market may be a little tired, and rightly so,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview. His firm oversees $250 billion. “Global news flow is relatively light again today, and with little in the way of catalysts, it would not be surprising to see the streak end. That being said, as long as central bank accommodation remains, any pullback should be short-term in nature.”
In Europe, SBM Offshore NV surged 21 percent after the world’s biggest supplier of floating oil production platforms agreed to pay $470 million to settle a dispute with Talisman Energy Inc. Antofagasta Plc advanced 3.1 percent as the copper producer controlled by Chile’s Luksic family increased its dividend.
British Land Co. (BLND), the U.K.’s second-largest real estate investment trust, fell 4.4 percent on plans to raise about 500 million pounds in a share sale to spend on acquisitions and development.
The Stoxx Europe 600 Index (SXXP) closed up less than 0.1 percent. The volume of shares changing hands in Stoxx 600 companies was 9.7 percent lower than the 30-day average today after the gauge rallied to a 4 1/2-year high last week. S&P 500 trading was about 13 percent below average at this time of day.
The VStoxx Index, which gauges the cost of hedging against moves in the Euro Stoxx 50 Index, fell 1.7 percent to 17.32, a one-month low. In the U.S., the Chicago Board Options Exchange Volatility Index rebounded 6.1 percent to 12.27 today after sliding to the lowest level in more than six years yesterday.
‘Ahead of Reality’
“Sentiment is ahead of reality and stock markets are one or two steps ahead of the real economy,” said Pang Cheng Duan, a managing director in Singapore at Manulife Asset Management, which oversees about $45.3 billion in Asia. “The rally cannot go on liquidity alone, and we need more impetus like better corporate earnings.”
The yen snapped a four-day drop against the dollar and euro after an opposition lawmaker said the Democratic Party of Japan would oppose the nomination of Kikuo Iwata for deputy governor of the central bank, damping bets for greater monetary stimulus.
The pound weakened against 11 of its 16 major peers. Industrial production fell 1.2 percent from December, when it rose 1.1 percent, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 29 economists was for a 0.1 percent increase.
The yield on 10-year U.K. gilts tumbled five basis points to 1.96 percent. The yield on British securities fell below their U.S. counterparts for the first time in five months yesterday. Spanish bonds advanced for a 10th day, the longest rally since August 2005.
The Hungarian forint retreated 1.5 percent versus the euro, falling to a nine-month low, as inflation slowed. The rand weakened against all 16 major peers after South Africa posted a current-account shortfall.
The MSCI Emerging Markets Index (MXEF) fell 0.5 percent, declining for a second day. The Shanghai Composite Index (SHCOMP) slid 1 percent to lead declines, falling for a fourth day in the longest stretch of losses since November, on speculation regulators may resume initial public offerings.
The S&P GSCI gauge of 24 raw materials increased 0.1 percent as zinc, lead, cocoa and aluminum climbed at least 1.3 percent to lead gains. Gold futures for April increased 0.9 percent to $1,591.70 an ounce, the highest level of the month, as signs of slowing growth in Europe increased speculation that central banks will expand stimulus measures, boosting demand for precious metals as a store of value.
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