Treasuries Rise as Dollar Weakens on Fed Rate BetsJeremy Herron and Joseph Ciolli
Treasuries rose and the dollar weakened on speculation the Federal Reserve won’t be in a hurry to boost interest rates. The Standard & Poor’s 500 Index retreated in late trading after climbing within four points of a record.
The Bloomberg Dollar Spot Index slid 0.9 percent at 4 p.m. in New York, capping its worst two-day slide since 2009. The S&P 500 fell 0.2 percent, following its best weekly gain since the start of February. The guage erased an earlier advance in the final 15 minutes of trading. The Stoxx Europe 600 Index dropped 0.7 percent. The yield on 10-year Treasury notes lost two basis points to 1.91 percent. U.S. crude advanced from near a six-year low and gold rose with copper.
Fed Vice Chairman Stanley Fischer said there won’t be a “smooth upward path” for interest rates even as the first increase may be warranted by late 2015. Global equities rallied the most in almost two years last week after the Fed signaled a delay in higher interest rates amid record stimulus in Europe and Japan. German Chancellor Angela Merkel reached out to Greek Prime Minister Alexis Tsipras, saying his country belongs in Europe and she wants its economy to succeed.
“I don’t see any reason to think we need to take another leg up to start the week today,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “The market is going to remain in a trading range, and we’re in the upper band right now.”
The rate on 10-year Treasury notes slipped and the dollar dropped against all but one of its 16 major counterparts Monday, as investors parsed comments from Fed officials for clues on the timing of their first interest-rate increase since 2006. The greenback weakened 1.3 percent to $1.0965 per euro.
Fischer’s comments came after Cleveland Fed President Loretta Mester said in in a Bloomberg Television interview in Paris Monday that it is appropriate to raise rates this year. San Francisco Fed President John Williams and St. Louis Fed President James Bullard also speak this week.
“Whether it’s going to be June or September, or some later date, or some date in between, will depend on the data,” said Fischer, responding to a question from the audience following a speech at the Economic Club of New York. Labor market readings would be an important guide. The next Labor Department payrolls report comes April 3.
Data today showed sales of previously owned U.S. homes fell short of a 5 million annual rate in February for a second month. Demand is failing to gain traction as home values rise faster than incomes, borrowing standards remain relatively strict and buyers have fewer properties from which to choose.
Six of the 10 main S&P 500 groups retreated today, led by a 0.8 percent drop among industrials. Transportation shares in the gauge lost 2.5 percent as Kansas City Southern Corp. plunged 8 percent after cutting its 2015 forecast for revenue growth.
The Nasdaq Biotechnology Index fell 2.2 percent from a record, sending the Nasdaq Composite Index lower by 0.2 percent. Vertex Pharmaceuticals Inc. dropped 4 percent after the company said its cystic fibrosis drug combined with an experimental drug helped patients’ breathing less than analysts forecast.
The Nasdaq Composite jumped on Friday to a 15-year high, climbing within seven points of erasing its losses since the end of the dot-com bubble. The gauge of predominantly technology stocks added 3.2 percent last week, the most since October, amid five straight gains.
Producers of consumer staples added 0.3 percent to lead gains. McDonald’s Corp. rose 1.6 percent amid renewed pressure to form a real estate investment trust, while Tiffany & Co. jumped 5.8 percent and Darden Restaurants Inc. gained 3.8 percent.
Tsipras’s meeting in Berlin with the leader of the biggest contributor to his nation’s stalled 240 billion-euro bailout is a precursor to make-or-break decisions he faces as Greece’s margin for avoiding a default becomes more slim.
Merkel, who gave Tsipras a red-carpet reception at the Chancellery, still declined to make any offers of financial aid on behalf of Germany, saying those decisions are for the governments of all of Greece’s 18 partners in the euro area to make. She said she’s seeking to build trust with Tsipras.
While Spanish and Italian bonds declined, German bunds were little changed, with the 10-year yield about two basis points above the record low, as the European Central Bank enters the third week of its program to buy government debt. Spain’s 10-year yield rose eight basis points to 1.2 percent.
“The market is awaiting tangible news from Greece’s debt talks and that probably explained some weakness in peripheral bonds,” said Michael Leister, a senior rates strategist at Commerzbank AG in Frankfurt. “But in any case, we expect structural demand from the ECB’s quantitative-easing program to provide support for the market.”
The Stoxx 600 ended Friday within 0.4 percent of its March 2000 record close. The U.K.’s FTSE 100 Index, which climbed above 7,000 for the first time last week, added 0.2 percent Monday.
Among stocks moving on corporate news, Bilfinger SE lost 1.1 percent, paring an earlier drop of as much as 3.4 percent, after saying it is investigating allegations of bribery at its unit in Brazil. A measure of auto-related companies posted the second-biggest loss of the 19 industry groups on the Stoxx 600. Daimler AG and Volkswagen AG contributed the most, with declines of more than 3 percent.
“Many of us have been pushing European equities for quite some time, and now they are no longer cheap,” said Peter Braendle, who manages about $430 million at Swisscanto Asset Management in Zurich. “A bit of a pause seems quite healthy to me after the very respectable increase we’ve had this year. But it’s not a bad idea to stick to equities.”
The MSCI Emerging Markets Index of stocks rose for a sixth day, its longest advance since Aug. 20. The technology subgroup in the gauge rallied to a record, extending its 2015 gains to 10 percent.
The Shanghai Composite Index advanced 2 percent to the highest close since 2008. The gauge is heading for a ninth straight gain, even after China’s securities regulator urged investors to consider risks from the surging stock market.
The real led currencies higher as a gauge of 20 emerging-market currencies compiled by Bloomberg extended its biggest weekly increase since January 2012.
West Texas Intermediate, the U.S. benchmark, settled at to $47.75 a barrel in New York. Brent crude, the benchmark for more than half the world’s oil, climbed 1 percent to $55.88.
Gold advanced to a two-week high on speculation that the Fed will delay raising interest rates, increasing demand for the precious metal as an alternative investment.
Gold futures for April delivery added 0.3 percent to settle at $1,1190.50, the highest for a most-active contract since March 6.
Copper futures climbed to the highest in 11 weeks after a report showed demand for the metal topped production last year, adding to supply concerns. Futures for May delivery advanced 1.3 percent to $2.7975 a pound in New York, after touching $2.799, the highest for a most-active contract since Jan. 5.