US stocks slip, dollar gains as economic data bolsters Fed case

BLOOMBERG

U.S. stocks slipped while the dollar advanced with yields on two-year Treasuries after data on inflation and housing signaled the U.S. economy may be strong enough for the Federal Reserve to raise rates this summer.
The S&P 500 Index retreated after a Monday rally took it past its average price for the past 50 days. The U.S. currency appreciated to its strongest level in more than two weeks versus the yen, while two-year yields topped 0.80 percent. German 10-year bond yields rose to the highest in more than a week and the yen declined as demand for havens waned. The pound climbed as a poll indicated support is growing for the U.K. to stay in the European Union.
Global equities have fluctuated after reaching a four-month high on April 20 as investors scrutinize data for clues on the timing of the Fed’s next policy move. Data on Tuesday showed gains in consumer prices and new-home construction a day after manufacturing readings disappointed. There is scant evidence that unprecedented stimulus from Japan to Europe has jumpstarted growth in those economies, adding to concern that tightening in America could stifle global expansion.
“Some strength is reassuring but too much strength threatens to bring the Fed in with a vengeance,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland. “Markets are range-bound at this point — unless there’s a lot of surprise in the numbers, there won’t be a lot of potential to move things substantially.”

Stocks
The S&P 500 fell 0.4 percent to 2,059.27 at 10:28 a.m. in New York, halting a rebound yesterday sparked by a rise in crude and gains in Apple Inc. Following a 15 percent rally from a February low to a four-month high on April 20, the S&P 500 has struggled to maintain momentum amid mixed earnings releases and signs of a lukewarm economic pickup.
Minutes from the Federal Reserve’s April meeting are due Wednesday. Traders are pricing in only a 6 percent chance the Fed will increase rates in June. December is now the first month with at least even odds of higher borrowing costs.
Home Depot Inc. posted first-quarter profit that topped analysts’ estimates and raised its forecast for the year. Agilent Technologies Inc. climbed after boosting its earnings forecast for 2016. TJX Companies Inc. rose after raising its annual profit projection and surpassing analysts’ estimates for first-quarter earnings.
The Stoxx Europe 600 Index was little changed, seeking a third straight
advance after falling as much as 5.4 percent from an April peak. Emerging-market equities climbed for a second day as Apple supplies advanced on news that Berkshire Hathaway Inc. took a stake in the iPhone maker.

Bonds
Ten-year Treasury bonds advanced, while shorter-dated government debt fell, sending yields on two-year notes higher by two basis points to 0.80 percent. The extra yield that 10-year debt offers over two-year notes shrank
to the smallest since 2007 on a closing basis.
Ireland emerged as America’s fourth-largest creditor following China, Japan and the Cayman Islands after the U.S. government revised the way it reports the figures.
Currencies
The dollar rose toward a three-week high against the yen as the cost of living in the U.S. climbed by the most in three years.
“Investors are starting to pare back some of the negativity on the dollar,” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc. “The dollar’s got some room to move higher here.”
The dollar rose 0.2 percent to 109.27 yen as of 9:18 a.m. in New York, after reaching the highest level on a closing basis since April 27. It was little changed at $1.1325 per euro.
The pound rallied the most in three weeks after a poll of U.K. voters released Monday showed people who support a campaign to remain in the European Union exceeded those saying they will vote to leave by a wider margin than last month.

Commodities
Oil traded near a seven-month high on speculation that U.S. crude stockpiles declined last week while supply losses in Canada and Nigeria whittled away the global excess.
West Texas Intermediate crude for June delivery rose 0.8 percent to $48.13 a barrel on the New York Mercantile Exchange. Futures touched $48.42, the highest since Oct. 13. Prices gained $1.51 to $47.72 on Monday, the highest close since Nov. 3.
Zinc fell for the first day in three as orders to remove the metal from warehouses extended declines to the lowest in four years, a sign of lukewarm
demand.