Treasuries, U.S. Stocks Climb on Home Data; Gold Rallies

Treasuries and U.S. stocks rose as a report showing a plunge in home sales eased concern the Federal Reserve will cut stimulus efforts next month. Gold and oil rallied while the dollar weakened. Emerging-market equities gained for the first time in seven days.

The 10-year Treasury yield dropped seven basis points to 2.82 percent at 4 p.m. in New York, after reaching a two-year high yesterday. The Standard & Poor’s 500 Index rose 0.4 percent for the first back-to-back advance in three weeks. The MSCI Emerging Markets Index climbed 1.4 percent, trimming this week’s loss to 2.4 percent as currencies from India’s rupee to Brazil’s real strengthened. Gold rallied 1.8 percent. The Bloomberg U.S. Dollar Index fell for the first time in three days.

Fed officials met today at a conference in Jackson Hole, Wyoming, to discuss monetary policy. Purchases of new U.S. homes plunged in July by the most in more than three years, a sign that growth in the industry may be taking a pause as mortgage rates rise. Countries from India to Indonesia signaled they will take steps to support financial markets and Brazil announced a $60 billion intervention program involving currency swaps and loans.

“The new home-sales data tells us that all is not well with the economy, and the Fed needs to continue to support growth,” Tom Power, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “The housing recovery is an important thing that the Fed will be looking at when it makes its decision on the timing of the tapering.”

Home Sales

U.S. sales of newly built homes declined 13 percent to a 394,000 annualized pace, the weakest since October, following a 455,000 rate in the prior period that was lower than previously estimated, Commerce Department figures showed today in Washington. The median estimate of 74 economists surveyed by Bloomberg called for a decrease to 487,000. Last month’s decline was the biggest since May 2010.

“The fact that there are rising interest rates looks like it may be starting to bite into new home sales,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $180 billion, said in a phone interview. “That’s probably going to cause the economy be a little softer in the second half.”

Benchmark 10-year yields had touched the highest level since July 2011 after Fed minutes released this week showed most officials are comfortable with a plan to start reducing bond purchases if the economy improves.

September Move

Three Fed regional bank presidents, speaking in interviews today at Jackson Hole, differed over the timing for reducing the Fed’s $85 billion in monthly bond buying, with one backing a tapering next month if the economy remains strong and two others saying policy makers should take time to assess economic data.

“We can take our time” on slowing purchases, St. Louis Fed President James Bullard, who holds a vote on policy this year, said in a Bloomberg Radio interview from Jackson Hole. San Francisco’s John Williams told CNBC he wants to “taper our purchases later this year” if the economy doesn’t flag, while Atlanta’s Dennis Lockhart said he “would be supportive” of slowing purchases next month if the expansion holds up.

Microsoft Inc. rallied 7.3 percent today after Chief Executive Officer Steve Ballmer said he would retire within 12 months. PulteGroup Inc. sank 1.6 percent to pace declines in an index of homebuilder stocks.

Trading Halt

Nasdaq OMX Group Inc. rose 1.2 percent after the shares slid the most in more than four months following a trading disruption yesterday. Nasdaq halted trading of its listed stocks for three hours yesterday because a computer problem left some investors without quotes and the company did not want to have “information asymmetry,” Chief Executive Officer Robert Greifeld said in interviews today.

The Chicago Board Options Exchange Volatility Index, or VIX, dropped 5.3 percent to 13.98. The equity volatility gauge has fallen 2.7 percent in the past five days, halting two consecutive weeks of advances.

The Stoxx Europe 600 Index increased 0.4 percent, trimming its decline for the week to 0.5 percent. An index of household confidence in the euro zone improved for a ninth month to the highest level since July 2011, the European Commission in Brussels said in a preliminary report. U.K. gross domestic product increased 0.7 percent in the second quarter from the previous period, when it rose 0.3 percent, the Office for National Statistics said in London.

A gauge of European oil and gas stocks rose the most, advancing 1.2 percent. Glencore Xstrata Plc and Rio Tinto Group led gains in mining companies.

Emerging Markets

The MSCI gauge of shares from 21 developing countries rebounded as its worst week in two months drove shares to a six-week low. About $1.5 trillion has been erased from the value of emerging-market equities since Fed Chairman Ben S. Bernanke said on May 22 policy makers could scale back bond buying.

Benchmark equity gauges in India, Brazil and South Korea gained more than 1 percent. The rupee jumped 2 percent against the dollar, the real gained 3.4 percent. The Thai baht and the Malaysian ringgit strengthened, rebounding from three-year lows.

“Emerging markets should remain very volatile for the remainder of this year as governments try to restore investor confidence and stem capital outflows,” Vana Bulbon, chief executive officer at UOB Asset Management (Thailand) Co. Ltd., which manages about $6.4 billion, said in Bangkok. “The global outlook has been improving led by growth in the U.S, while economies in Europe and China have bottomed out.”

Government Securities

The 10-year Treasury yield fell seven basis points to 2.82 percent. The yield climbed to 2.93 percent yesterday, the highest since July 2011.

Treasuries due in 10 years and longer are the worst performing government securities in the Group of Seven this month, tumbling 3.7 percent through yesterday, before the U.S. sells $98 billion of notes and bonds next week.

Gold jumped to an 11-week high as the home-sales data boosted speculation the Fed will maintain fiscal stimulus. Futures for December delivery rose 1.8 percent to $1,395.80 an ounce on the Comex in New York. Earlier, the price reached $1,398.70, the highest since June 7. Silver climbed 3 percent to $23.781 an ounce.

Crude futures increased 1.3 percent, the most in two weeks, to $106.42 a barrel. Prices fell 1 percent this week.

The dollar declined 0.2 percent to $1.3382 per euro, erasing an earlier advance. The yen was little changed at 98.69 per dollar after touching 99.15, the weakest level since Aug. 5. Japan’s currency dropped 0.2 percent to 132.06 per euro, having fallen 1.6 percent this week.

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