Thrust and parry

Equities can't hold gains

The Standard & Poor’s 500 Index erased gains, retreating from a record, while Treasuries fell as technology and phone stocks led declines. The euro strengthened after data showed faster-than-estimated inflation.

The S&P 500 fell 0.1 percent to 1,853.02 at 3:03 p.m. in New York, erasing an earlier gain of 0.7 percent that put the gauge at a fresh intraday record. Yields on 10-year Treasuries increased two basis points to 2.66 percent, climbing for the first time in four days. The Stoxx Europe 600 Index rose 0.2 percent, reversing an earlier drop of 0.5 percent. Europe’s shared currency jumped 0.7 percent to $1.3809. Germany’s 10-year bund yield added six basis points to 1.62 percent. Natural gas rallied 2.1 percent and gold fell.

U.S. data showed consumer confidence improved in February from a month earlier while gross domestic product expanded at a slower pace than initially estimated in the fourth quarter. Consumer prices in Europe grew an annual 0.8 percent, more than the 0.7 percent median forecast in a Bloomberg survey, easing pressure on the European Central Bank to take action next week to foster the fragile economic recovery.

“The markets are trying to gauge if the economic slowdown is weather-related or actually real and systemic,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $150 billion of assets, said by phone. “The vote amongst market speculators is that this is a transitory effect. There’s also the factor that Janet Yellen strongly indicated yesterday that the Fed is by no means stuck to a firm taper, even if the economy decelerates its growth trajectory.”

Fed Stimulus

The S&P 500 gained 0.5 percent to a record yesterday after Fed Chair Janet Yellen said the central bank may change its strategy for reducing asset purchases should the economy weaken. The gauge has climbed 4.3 percent this month, the most since October, as investors speculated that severe winter weather explains the weakness in reports such as housing and hiring.

U.S. equities are set to enter the sixth year of a bull market that started March 9, 2009. Three rounds of stimulus have helped push the S&P 500 up 175 percent from a 12-year low.

Fed policy makers trimmed their bond purchases by $10 billion for a second time in January, to a $65 billion monthly pace. The Federal Open Market Committee next meets March 18-19.

Fed Bank of Philadelphia President Charles Plosser, who votes on policy this year, said the Fed should press on with plans to trim its bond purchases with the economy likely to grow about 3 percent this year.

“I actually am optimistic about the longer-term growth of the economy,” Plosser said today in an interview on Bloomberg Television’s “Surveillance” with Tom Keene. “What we’re seeing is that many of the things that held us back such as the deleveraging of household balance sheets are starting to wane.”

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