U.S. Stocks Rise With Dollar, Treasuries Slide on Prices

U.S. stocks rose a third day, the dollar gained and Treasuries fell the most in two weeks, after data showed U.S. inflation quickened as the Federal Reserve begins a policy meeting. Crude slid from an eight-month high.

The Standard & Poor’s 500 Index rose 0.2 percent at 4 p.m. in New York. The Russell 2000 Index of small companies advanced to a two-month high. The rate on 10-year Treasury notes added six basis points to 2.65 percent. West Texas Intermediate crude slid 0.6 percent and gold snapped its longest rally since February. The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, added 0.3 percent.

Fed policy makers start a two-day meeting today as a report showing an increase in consumer prices signaled inflation will move closer to the bank’s 2 percent goal. Separate data showed housing starts declined in May. The Fed will probably raise rates faster than money-market investors expect, based on a Bloomberg News survey of economists. Iraq’s military said it repelled an attack by an al-Qaeda breakaway group. The nation’s crude output hasn’t been hurt by the violence, the International Energy Agency said today.

“Overall, you’re still in a market environment where the path of least resistance is up,” John Canally, an economic strategist at LPL Financial Corp., said in a phone interview from Boston. His firm oversees about $447.1 billion. “Another bump tomorrow could be the FOMC, although the outcome is largely already priced in.”

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The S&P 500 has advanced 5.1 percent this year, reaching a record on June 9, as equities were boosted by better-than-forecast economic data and monthly asset purchases by the Fed. The index is trading at 16.4 times the projected earnings of its members, up from 15.5 times at the beginning of the year.

The Russell 2000 rose 0.9 percent to the highest since April 3. It has rallied 7.4 percent from a May low, rebounding after a selloff in small-cap and Internet stocks. The gauge is 2.7 percent below its all-time high reached in March.

Financial stocks rose the most in the U.S. today with online brokers rallying as the Senate’s Permanent Subcommittee on Investigations met for a hearing to examine conflicts of interest embedded deep in the plumbing of equity markets. U.S. stock exchanges called for greater public disclosure or elimination of incentives and fees that lawmakers said favor the interests of high-speed traders over other investors.

E*Trade Financial Corp. and Charles Schwab Corp. rallied more than 5.5 percent.

Very Robust

“This is a phase where you still want to be invested in U.S. equities,” said Samy Chaar, a strategist at Lombard Odier in Geneva. “The economy is very robust, you still have cash returning zero, and the Fed is still pretty active. But economic activity is maturing and this may bring some sort of discomfort for investors.”

Treasury two-year note yields reached the highest level since September as the consumer price index increased 0.4 percent in May, the biggest gain since February 2013. A pickup in inflation lessens the threat of a prolonged drop in prices that hurts economic growth, giving Fed officials reason to continue to scale back their unprecedented bond-buying program.

The central bank will reduce the pace of monthly asset purchases by $10 billion to $35 billion, economists project. Some 62 percent of 58 economists in a Bloomberg survey predict the Fed will halt bond buying at its October meeting.

Crude, Dollar

Another report today showed builders broke ground on 1 million homes in May, indicating the industry is picking up this quarter after a weather-induced slump to start the year. An S&P index of U.S. homebuilders added 0.5 percent.

WTI crude for July delivery fell 0.6 percent to $106.22. Prices capped a 4.1 percent increase last week, the most since December, when escalating violence in Iraq fanned concern that supplies from OPEC’s second-largest producer may be disrupted.

Iraq’s oil exports from its southern terminals on the Persian Gulf are poised to surge, according to a preliminary loading plan obtained by Bloomberg News, at a time when fighting has plunged the north into chaos.

U.S. and Iranian officials met in Vienna yesterday as President Barack Obama reaches out for help in combating a growing insurgency by Sunni Muslims in Iraq.

Gold Slump

Gold for August delivery dropped 0.3 percent to settle at $1,272 in New York. The metal had gained for six straight sessions to a three-week high. Futures climbed 1.7 percent last week amid escalating tensions from Ukraine to Iraq.

The Federal Open Market Committee’s “June meeting will be in focus this week while a U.S. dollar rebound could weigh on bullion prices, provided Iraqi headlines subside,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in an e-mailed note today.

The dollar rose 0.3 percent to 102.13 yen. The greenback added 0.2 percent to $1.35446 versus the euro. The shared currency was little changed at 138.34 yen. The pound halted a four-day gain versus the dollar as U.K. inflation slowed to the least in 4 1/2 years.

Soybeans futures fell 0.4 percent after earlier touching the lowest since June 5 on signs of improving conditions for crops in the U.S., the world’s biggest grower. Corn fell to the lowest since February.

Emerging Stocks

The MSCI Emerging Markets Index extended a decline into a fifth day amid concern that a reduction in Fed stimulus may reduce liquidity. The gauge dropped 0.4 percent to the lowest in nearly two weeks.

The Stoxx Europe 600 Index advanced for the first time in three days as 14 of the 19 main industries climbed. The gauge closed at its lowest level since June 5 yesterday.

Shire Plc climbed to a record after a report said it has hired Citigroup Inc. as it may receive takeover offers. Whitbread Plc added 2.2 percent after sales at its Premier Inn hotels and Costa Coffee chain topped analysts’ estimates. A.P. Moeller-Maersk A/S fell 5.3 percent after China blocked the formation of a global alliance by the world’s three biggest shipping lines.

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