Dollar Rallies, Commodities Slide; S&P 500 Reaches Record

The Dollar Index extended its biggest two-day rally since July, helping trigger a plunge in commodities, and Treasuries tumbled amid improving confidence in the strength of the American economy. U.S. stocks advanced, returning benchmark indexes to all-time highs.

The Dollar Index, a gauge of the currency against six major peers, added 0.4 percent to 83.15 to extend its two-day gain to 1.5 percent. The yen traded beyond 101 per dollar for the first time in four years. Gold lost more than 2 percent and wheat and corn fell after a crops report. Ten-year Treasury yields rose eight basis points to 1.89 percent, the highest since March. The Standard & Poor’s 500 Index rose 0.4 percent to 1,633.7, extending a weekly gain to 1.2 percent and reaching a record for the sixth time in seven days.

Gold and wheat helped lead losses in 20 of the 24 commodities tracked by the S&P GSCI Index, sending the gauge down as much as 2.2 percent, as the stronger dollar caused declines in prices of materials denominated in the U.S. currency. U.S. jobless claims yesterday fell to a five-year low, bolstering optimism in the economy. Group of Seven finance chiefs and central bankers meet today in the U.K. for talks.

“Commodities are taking a hit because the dollar is ripping,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The Dollar Index crossed 83, which is hurting all these markets.”

Dollar, Commodities

The U.S. dollar strengthened against all 16 major peers, climbing more than 1 percent versus the currencies of New Zealand and South Korea.

Gold for June delivery tumbled 2.2 percent to $1,436.60 an ounce. West Texas Intermediate oil dropped 0.4 percent to $96.04 a barrel, paring a loss of as much as 3.1 percent.

Wheat fell 2.4 percent and corn declined 2.1 percent. Corn inventories in the U.S., the world’s largest grower and exporter, may more than double as farms recover from the drought in 2012 to produce the biggest crop ever. The harvest this year will surge 31 percent from 2012 to 14.14 billion bushels (359.2 million metric tons), the U.S. Department of Agriculture said today in a report.

The S&P 500 retreated 0.4 percent yesterday after reaching a record for five straight days. The index is up 15 percent this year and has surged more than 141 percent since its bear-market low in 2009 amid earnings growth and monetary stimulus from the Federal Reserve.

Stock Movers

Gap Inc. added 5.6 percent after forecasting first-quarter profit that topped estimates. Nvidia Corp. rose 4.5 percent as fiscal first-quarter sales and earnings exceeded projections. Molycorp Inc. jumped 31 percent after posting a narrower-than-estimated loss. Hess Corp. sank 2.3 percent after saying it will strip its chief executive officer of the chairmanship. Energy and commodity stocks posted the only declines out of 10 S&P 500 groups, while health-care and consumer shares led gains. S&P 500 financial shares gained 0.5 percent as a group.

Federal Reserve Chairman Ben S. Bernanke said risks persist in wholesale funding markets used frequently by Wall Street brokers to finance securities trading.

“Important risks remain in the short-term wholesale funding markets,” Bernanke said today in a speech at a Chicago Fed banking conference. “One of the key risks is how the system would respond to the failure of a broker-dealer or other major borrower.”

The Stoxx Europe 600 Index climbed for a fourth day as ArcelorMittal and BT Group Plc reported earnings that topped estimates. The world’s biggest steelmaker rallied 4.2 percent, the most since January, and the U.K. phone company jumped 12 percent, the biggest gain in almost four years.

The European gauge advanced 1.3 percent this week, a third straight week of gains.

Emerging Markets

The MSCI Emerging Markets Index fell 1 percent today, the most in three weeks, as the weaker yen threatens developing-nation exporters. The yen has tumbled 23 percent since September and is headed for its biggest annual loss since 1979 as Prime Minister Shinzo Abe and the Bank of Japan boost the supply of the currency to beat deflation.

South Korea’s Kospi index dropped 1.8 percent, the most since July 23 on a closing basis, as Samsung Electronics Co., South Korea’s biggest exporter of consumer electronics, slid 2.6 percent.

The won depreciated 1.3 percent versus the dollar, the most in three months, on speculation South Korean authorities will favor depreciation to support exporters as the yen’s decline makes Japanese rivals more competitive.

Thailand’s baht weakened 1 percent against the dollar. Finance Minister Kittiratt Na-Ranong said today the Bank of Thailand should reduce its benchmark rate by more than a quarter of a percentage point or implement capital controls to stem baht appreciation.

Yen Slides

The yen breached 100 per dollar yesterday for the first time since April 2009 and analysts predict a year-end exchange rate of 105, according to the median of more than 50 estimates compiled by Bloomberg.

Japan’s currency slid 0.5 percent to 131.90 per euro and touched 132.26, its weakest level since January 2010. The Australian dollar fell below parity for the first time since June, dropping to as low as 99.61 U.S. cents.

The Swiss franc fell to the lowest since January against the euro amid reduced demand for haven assets, while Norway’s krone strengthened against all but one of its 16 major peers after a report showed inflation accelerated in April.

Japan’s 10-year yield climbed 10 basis points to 0.70 percent. The yield on similar-maturity German bunds increased 10 basis points to 1.37 percent.