Treasury 10-year yields touched 2% for the first time since April after U.S. durable-goods orders climbed more than forecast. The Standard & Poor’s 500 Index retreated following an eight-day rally, its longest since 2004. The yen strengthened and the pound weakened.
Rates on 10-year notes were up two basis points at 1.97 percent at 4 p.m. in New York after climbing to as high as 2.004%. The Standard & Poor’s 500 Index fell from a five-year high, losing 0.2% to 1,500.21. The Shanghai Composite Index jumped to a seven-month high as Chinese industrial companies’ profits gained for a fourth month. Japan’s currency rose against 14 of its 16 major peers. The pound dropped to its lowest level against the euro since 2011.
U.S. durable goods orders increased 4.6% in December, surpassing the 2% median forecast in a Bloomberg survey. Policy in developed countries isn’t “maxed out” and central bankers can be flexible in meeting inflation goals, Mark Carney, who becomes Bank of England governor in July, said at the World Economic Forum over the weekend.
“The economy is probably getting on better footing,” said Scott Sherman, an interest-rate strategist in New York at Credit Suisse Group AG, one of 21 primary dealers that trade directly with the central bank. “People down the road will start speculating when the Fed is going to unwind.”
Two-year notes also retreated, sending their yields up less than one basis point to 0.28%. Thirty-year rates increased one basis point to 3.14%.
The S&P 500 closed at the highest level since December 2007 last week. The index has rallied 5.3% this month, the best start to a year since 1987. Pension funds may need to sell stocks and buy fixed income to rebalance asset allocations, according to Societe Generale SA. U.S. pensions may pull $22 billion from equities, strategist Ramon Verastegui wrote in a note.
Caterpillar Inc., the biggest maker of construction and mining equipment, led gains in the Dow Jones Industrial Average after saying growth in its sales and profit in 2013 will come in the second half as the world economy improves.
Ryland Group Inc. and PulteGroup Inc. paced losses in builders after pending-home sales declined in December for the first time since August. The index of contracts for the purchase of previously owned homes fell 4.3% to 101.7 after a revised 1.6% increase, the National Association of Realtors said. The median forecast in a Bloomberg survey projected no change in the gauge. Compared with a year earlier, sales before seasonal adjustment climbed 4.9%.
The Stoxx Europe 600 Index slipped 0.1% after rising to a 23-month high on Jan. 25. SBM Offshore NV rose 3.4% after Morgan Stanley raised its recommendation for the stock. Debenhams Plc, the second-largest U.K. department-store chain, dropped 2.9% after Morgan Stanley cut its rating of the shares.
The Bloomberg-JP Morgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, fell for a fourth day, dropping 0.3%. South Korean officials signaled last week that they would boost measures to curb gains in the won, which strengthened 8.3% against the dollar in 2012. Taiwan’s central bank said today it would intervene if needed.
The yen appreciated as Economy Minister Akira Amari denied that the government is trying to weaken the currency and data showed investors decreased bearish bets. Speculation the Bank of Japan will expand stimulus has driven the yen down 12% against the dollar and 16% against the euro since Nov. 14, when elections were announced.
Japan’s highest priority is exiting from deflation and revitalizing the economy, Amari told the World Economic Forum’s annual meeting in Davos, Switzerland, on Jan. 26.
Britain’s pound depreciated 0.6% to 85.745 pence per euro and weakened 0.7% to $1.5693.
“A currency war, a series of tit-for-tat competitive devaluations, would trigger trade protection measures that would damage global trade and therefore growth globally,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong. Kuijs previously worked for the World Bank. “That would not be good for any country with a stake in the global economy.”
Germany’s 10-year bond yield rose six basis points, or 0.06 percentage point, to 1.69%, the highest since September.
The S&P GSCI gauge of 24 commodities gained 0.4% as gasoline, sugar and cattle climbed more than 1.7% to lead gains. Oil futures rose 56 cents to $96.44 a barrel. Natural gas tumbled 4% to a two-week low of $3.308 per million British thermal units amid revised forecasts for mild mid-February weather that would reduce demand for the heating fuel.
The MSCI Emerging Markets Index fell 0.6% as technology stocks led declines. The Shanghai Composite Index climbed 2.4% as industrial companies’ net income increased 17.3% in December, the National Bureau of Statistics said yesterday. Turkey’s benchmark index tumbled 4.2%, the most since September 2011, as a credit-rating upgrade anticipated by some analysts failed to materialize from Moody’s Investors Service. Russia’s Micex Index added 1.2%, while Brazil’s Bovespa index slipped 1.9%.