Most U.S. Stocks Drop While Dollar Rises With Treasuries

Stocks: Why The Great Rotation Hasn’t Happened Yet

U.S. stocks dropped while the dollar strengthened as data on consumer prices showed signs inflation is perking up. Treasuries advanced after the sale of two-year notes was characterized as good by firms obligated to bid.

The Standard & Poor’s 500 Index lost 0.6 percent to 2,091.50 by 4 p.m. in New York, its 25th day without consecutive gains, the longest stretch since 2001. The Nasdaq Composite Index erased an early advance to finish down 0.3 percent, while the Stoxx Europe 600 Index climbed 0.3 percent. The Bloomberg Dollar Spot Index rallied 0.2 percent as yields on 10-year Treasuries fell four basis points to 1.87 percent. U.S. crude settled at $47.51 a barrel. Gold rose to a two-week high while copper futures capped a fourth day of gains.

The cost of living in the U.S. climbed 0.2 percent in February from the previous month, as fuel costs stabilized. The Federal Reserve is looking for inflation to accelerate as policy makers weigh the timing of the first rate increase since 2006. Purchases of new homes in the U.S. unexpectedly rose in February to a seven-year high. A $26 billion sale of two-year notes was rated a ‘4’ by five of the Fed’s primary dealers.

“The market is looking for new direction, but it hasn’t seen it yet,” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said by phone. “That’s why we’re churning and trading in a pretty narrow range.”

The S&P 500 earlier rose as much 0.2 percent before retreating in afternoon trading to cap a second consecutive day of losses. In echoes of Monday trading, selling accelerated into the close and the index ended at its low for the session. The Nasdaq Composite jumped 0.4 percent to within 20 points of its all-time high before giving back the gains to end at its low for the day.

Technology, Utilities

The technology-stock measure has almost quadrupled since global equity markets bottomed in March 2009, paced by a 10-fold gain in shares of Apple Inc, the world’s most valuable company. The index is now about 50 points below its record close of 5,048.62, reached on March 10, 2000.

Utility shares led declines in the S&P 500 Tuesday with a 1.2 percent slide. Financial and energy shares retreated at least 0.8 percent, as all of the 10 main industry groups fell. Diamond Offshore Drilling Inc. and Oneok Inc. slid at least 3.4 percent. Freeport-McMoRan Inc. lost 0.8 percent after cutting its dividend amid a slump in commodities prices.

U.S. equities rallied last week, while the Bloomberg dollar gauge had its biggest drop in three years after the Fed cut projections for future interest rates, inflation and growth.

Fed Bank of San Francisco President John Williams said Tuesday that a discussion should happen mid-year about tightening policy, even as he lowered his growth forecast. Fed Vice Chairman Stanley Fischer said Monday “a smooth path upward in the federal funds rate will almost certainly not be realized” as the economy encounters shocks such as the surprise plunge in oil prices.

Data Watch

“Whether it’s going to be June or September, or some later date, or some date in between, will depend on the data,” Fischer said.

Data Tuesday showed sales of new homes climbed 7.8 percent to a 539,000 annualized pace, the most since February 2008. The reading exceeded even the most optimistic forecast of economists surveyed by Bloomberg. Prices for items, excluding food and energy, climbed 1.7 percent in February from a year earlier after a 1.6 percent increase the month before.

“This CPI number isn’t going to cause the Fed to act, and still supports the lower-for-longer theme, which is generally good for stocks and risk assets,” Anthony Valeri, a market strategist with LPL Financial Corp. in San Diego, said in a phone interview. “There’s still a lot of optimism in the market -- we still see the longer-term trend of higher prices intact.”

Dollar Momentum

The dollar regained some momentum Tuesday, increasing 0.2 percent to $1.0946 per euro after declining 2.6 percent over the previous two days. The greenback, which was little changed at 119.74 yen, has gained for eight consecutive months as traders speculated the Fed was moving toward raising rates this year, while global peers including the European Central Bank loosen policy to spur growth and stave off deflation.

European stocks rose, with banks and carmakers leading gains. Airlines slid as shares of Deutsche Lufthansa AG lost 1.6 percent after a plane run by its Germanwings subsidiary crashed in France. Data showed euro-area business activity expanded faster than forecast.

European shares have rallied more than 17 percent this year, with the Stoxx 600 closing at its highest level since 2000 last week, as the ECB started a quantitative-easing program.

Greek Proposals

Greek stocks and bonds rose. Yields on three-year notes fell 213 basis points, or 2.13 percentage point, to 19.60 percent, while the ASE Index added 3.7 percent.

European officials are preparing to assess Greece’s third set of economic policy proposals after German Chancellor Angela Merkel met with Greek Prime Minister Alexis Tsipras on Monday and urged him to do what is needed to qualify for aid. Billionaire investor George Soros said the chances of Greece leaving the euro area are now 50-50.

Developing-market stocks rose to a three-week high in their seventh day of gains as drugmakers and telecommunications shares rallied at least 1 percent. Chinese stocks eked out their longest winning streak in 23 years, with turnover climbing to a record, as investors bet weaker-than-estimated manufacturing data will spur further monetary stimulus.

The Shanghai Composite Index added 0.1 percent, erasing a loss of as much as 2.4 percent earlier in the day. The gauge has risen 12 percent during its 10-day rally, the longest winning streak since May 1992.

Russia, Oil

Russia’s Micex index rose 1 percent, rebounding from the lowest level in more than two months, driven higher by OAO Gazprom, the world’s biggest natural-gas producer. The ruble gained 1.8 percent against the dollar.

Brent crude oil dropped for the first time in three days on concern a global supply glut will persist.

Saudi Arabia, the world’s biggest exporter, is pumping about 10 million barrels a day, close to the record amount produced in 2013. U.S. crude stockpiles expanded for an 11th week through March 20, a Bloomberg News survey showed before a report from the Energy Information Administration Wednesday.

Brent for May settlement slid 1.4 percent to $55.11 a barrel in London. West Texas Intermediate for closed up 0.1 percent after earlier rising as much as 2.3 percent.

Gold futures for April delivery climbed 0.3 percent to $1,191.40 in New York. Copper for delivery in three months added 0.4 percent to $2.79 a pound in New York to cap the longest rally since October.

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