US Stocks Rise, Bonds Fall Before Fed Meeting Minutes

Bloomberg News

U.S. stocks fluctuated near an all-time high, while the dollar gained and Treasuries slid as investors speculated on how Federal Reserve minutes will affect interest-rate expectations.

The Standard & Poor's 500 Index (SPX) added 0.1 percent at 11:51 a.m. in New York, five points below a record as industrial shares jumped to offset a slump in energy producers. Ten-year Treasury yields rose one basis point to 2.41 percent. The dollar strengthened to an 11-month high versus the euro, while the pound appreciated against all but one of its 16 major peers. The Stoxx Europe 600 Index fell 0.1 percent. Argentina's bonds sank to a two-month low.

The Fed minutes may give investors more clues on the outlook for U.S. interest rates, after data yesterday showed inflation remains below target, even as the housing market gathers steam. Chair Janet Yellen will address global central bankers this week at a symposium in Jackson Hole, Wyoming. Bank of England Governor Mark Carney lost his consensus on not raising interest rates as two policy makers broke ranks.

'I think the consensus hope is that a dovish tone will prevail and I think that's causing the market to at least stabilize and see a little bit of a bump up here,' Sean Lynch, the Omaha, Nebraska-based managing director of global equity strategy and research for Wells Fargo Private Bank, said via phone. 'We had strong macroeconomic fundamentals, good data around housing, and a dovish policy wouldn't hurt.'

Jackson Hole

Investors will scrutinize the minutes from the July 29-30 Fed meeting to gauge whether improving economic data has made policy makers more inclined to pull forward the timing of any rate increase. The Fed remains on pace to wind down its monthly bond purchases in October, while Yellen has said officials will keep the benchmark interest rate low for a 'considerable time' after that.

Yellen will speak on labor markets Aug. 22 in Jackson Hole. Policy makers including European Central Bank President Mario Draghi will also speak.

The S&P 500 yesterday capped a 1.4 percent two-day rally that left it within seven points of a record reached July 24 amid bets that the Fed will leave interest rates near zero for longer even as economic growth shows signs of accelerating.

Three rounds of Fed stimulus and better-than-estimated corporate earnings have sent the index higher by as much as 194 percent from its bear-market low on March 2009. The gauge has not had a decline of 10 percent in almost three years.

Staples, Lowe's

Seven of the 10 main S&P 500 groups advanced today on volume 28 percent below the 30-day average at this time of day. Industrial shares rose 0.6 percent for the steepest gain, while energy shares lost 0.2 percent.

Boeing Co. and General Electric Co. jumped at least 0.9 percent to pace gains among large industrial stocks. Staples Inc. fell 1.2 percent after saying it will close up to 140 locations this year. Global Holdings Inc. slumped 11 percent after saying its full-year results will miss the low end of its forecast.

The yield on the benchmark 10-year note touched the highest level in almost a week, according to Bloomberg Bond Trader data. The rate slid to 2.30 percent on Aug. 15, the lowest since June 2013.

'There's not much conviction until this week's Jackson Hole speech,' said Gabriel Mann, a U.S. government-bond strategist at Royal Bank of Scotland Group Plc's RBS Securities unit in Stamford, Connecticut, one of 22 primary dealers that trade with the Fed. 'There won't be much in the way of any surprises' in the Fed minutes, he said.

The dollar rose 0.2 percent to $1.32926 per euro. It earlier appreciated to $1.3275, the strongest level since Sept. 13, on speculation the Fed is moving toward raising borrowing costs. The greenback climbed 0.4 percent to 103.31 yen after reaching 103.41, the most since April 7.

ECB, BOE

Investors will parse Draghi's speech as the ECB faces pressure to expand stimulus after the economies of Germany, France and Italy -- the largest in the 18-member union -- failed to grow in the second quarter.

Baca Juga

In the U.K., two BOE policy makers said economic circumstances 'were sufficient to justify an immediate rise in bank rate,' marking the first split on the benchmark rate in more than three years.

The pound strengthened 0.4 percent to 79.87 pence per euro, and advanced 0.2 percent to $1.6642.

Europe's higher-yielding bonds advanced, with rates on Italian and Spanish 10-year securities dropping to records. Italian 10-year (GBTPGR10) yields fell three basis points to 2.57 percent, after touching 2.561 percent, the lowest since Bloomberg started collecting the data in 1993.

The Stoxx 600 retreated today after rising 1.8 percent in the past two days. Heineken NV (HEIA) surged 7.9 percent as the world's third-biggest brewer posted profit in the first half that topped analysts' estimates. Carlsberg A/S slumped 3.6 percent after the biggest brewer in Russia cut its full-year earnings outlook.

Emerging Equities

The MSCI Emerging Markets Index was little changed today after closing at a three-year high. Developing-country stocks have rallied 3.7 percent in the past seven days through yesterday, as tensions in Ukraine and Iraq eased.

Russia's Micex (INDEXCF) rose 0.7 percent for a a ninth day of gains, the longest run since April 2010. The ruble fell 0.3 percent against the dollar. The Ukrainian hryvnia weakened 1.5 percent, declining for a second day after policy makers yesterday raised their overnight refinancing rate 2.5 percentage points to 17.5 percent.

The yen weakened to 103.31 per dollar after slipping 0.3 percent last session. Japan said exports rose 3.9 percent from a year earlier in July, exceeding the 3.8 percent increase forecast by economists. Imports also unexpectedly grew.

The MSCI Hong Kong Index climbed 1.3 percent, surpassing its all-time high reached in October 2007. The gauge has rebounded 21 percent from a February low, as the city's bourse operator led gains on optimism about a stock-trading link with Shanghai and developers jumped on record home prices.

Argentina Debt

Argentina's bonds sank to a two-month low after the government said it plans to pay foreign-currency notes locally to sidestep a U.S. court ruling that blocked payments and caused its second default in 13 years.

The government will submit a bill to lawmakers that lets overseas debt holders swap into new bonds governed by local law with the same terms, President Cristina Fernandez de Kirchner said in a nationwide address yesterday. Payments will be made into accounts at the central bank instead of through Bank of New York Mellon Corp., the current trustee.

West Texas Intermediate crude rose 0.7 percent to $95.09, the first gain in three days, after the Energy Information Administration reported U.S. inventories dropped last week.

Gold was little changed near a two-week low, as the stronger dollar cut demand. Bullion slipped 0.2 percent to $1,294.60.

Aluminum for delivery in three months climbed 1.9 percent to $2,078.25 a ton in London after earlier touching the highest since Feb. 22, 2013, as a report showed global production trailing consumption.

To contact the reporters on this story: Oliver Renick in New York at orenick2@bloomberg.net; Jeremy Herron in New York at jherron8@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeremy Herron, Jeff Sutherland