US stocks erase declines as Treasuries retreat, dollar gains

Bloomberg

Treasuries fell, with investors driving the benchmark yield higher as the government auctioned a deluge of bonds. US stocks pared losses in late-morning trading, looking to add to a six-day rally.
The Treasury started a week of auctions totalling $258 billion on Tuesday with $151 billion of short-term bills and $28 billion of two-year notes. The two-year rate jumped to the highest level since 2008 and the 10-year rate topped 2.9 percent. The S&P 500 Index was flat after falling as much as 0.5 percent amid earnings from Home Depot Inc. and Walmart Inc. The greenback gained versus major peers.
While speculators are turning bearish, money managers are looking at the highest US yields in years as a buying opportunity in a world where shorter-term Japanese and German notes still carry negative yields. Investors will also get to parse minutes this week from the most recent meetings of both the Federal Reserve and the European Central Bank.
The US stock market only had a taste of the potential damage from higher bond yields, with the biggest test yet to come, according to Morgan Stanley. “Appetizer, not the main course,” is how the bank’s strategists described the correction of late January to early February.
In Europe, the Stoxx 600 index edged higher after a pullback in equities emerged in Asia following several days of increases. Benchmarks in Japan and South Korea slid more than 1 percent. The yen weakened. Elsewhere, WTI oil traded in New York climbed above $62 a barrel for the first time in a week. Bitcoin broke above $11,500, almost double its intraday low from just two weeks ago.
The Federal Reserve will release minutes on Wednesday of its January 30-31 meeting, Janet Yellen’s last as chair, where officials kept the rate unchanged. Fed policy makers speaking this week include New York Fed President William Dudley and Atlanta Fed President Raphael Bostic. Cleveland Fed President Loretta Mester is among speakers at the US Monetary Policy Forum in New York City. Companies announcing earnings this week include Walmart, Glencore, Woolworths, Barclays and Royal Bank of Scotland. Chinese markets reopen on Thursday after holidays.
The S&P 500 rose less than 0.1 percent as of 11:38 am in New York, looking for a seventh straight advance. Walmart sank 9.5 percent and Home Depot rose 1.6 percent. The Nasdaq Composite Index added 0.5 percent. The Stoxx Europe 600 Index rose 0.4 percent. The MSCI Asia Pacific Index sank 0.8 percent, the first drop in more than a week. The MSCI Emerging Market Index declined 0.6 percent, the biggest decline in more than a week.
The Bloomberg Dollar Spot Index increased 0.5 percent to the highest in a week. The euro sank 0.6 percent to $1.233, the lowest in more than a week. The Japanese yen sank 0.6 percent to 107.250 per dollar. South Africa’s rand dipped 0.7 percent to 11.753 per dollar. The MSCI Emerging Markets Currency Index decreased 0.3 percent.
The yield on 10-year Treasuries increased three basis points to 2.90 percent. The 2-year yield rose three basis points to 2.22 percent, the highest since 2008. Germany’s 10-year yield fell less than one basis point to 0.73 percent. West Texas Intermediate crude rose less than 0.1 percent to $61.71 a barrel.