Bonds rise on Fed rate signal

Treasuries rose and the dollar dropped after the Federal Reserve signaled low rates would persist for a “considerable time” after bond purchases end. U.S. stocks fluctuated after the central bank cut stimulus and said the economy is gaining momentum.

The Standard & Poor’s 500 Index (CME:SPM14)(CME:SPM14) added 0.2 percent at 2:44 p.m. in New York. An index of Internet stocks lost 0.4 percent as Twitter Inc. dropped to the lowest level since its market debut and EBay Inc. retreated 5 percent after reporting results. Yields on 10-year Treasury notes fell four basis points to 2.65 percent. The Bloomberg Dollar Spot Index, which monitors the greenback against 10 major counterparts, fell 0.3 percent. The S&P GSCI gauge of 24 commodities sank 1 percent as oil slid below $100 a barrel.

“The Fed delivered on expectation in every conceivable way,” said Christopher Sullivan, who oversees $2.3 billion as chief investment officer at United Nations Federal Credit Union in New York. “Those who thought the Fed would be more concerned about the earlier weakness in the year are disappointed.”

The central bank said the economy is gaining momentum as consumers spend more, and said it would continue to trim the pace of bond purchases. Data earlier today indicated economic growth in the U.S. stalled in the first quarter as harsh winter weather chilled business investment, exports dropped and inventories climbed at a slower pace. Consumer spending on services rose by the most in 14 years.

 

Growth Accelerates

“Growth in economic activity has picked up recently, after having slowed sharply,” the Federal Open Market Committee said today in a statement following a meeting in Washington. “Household spending appears to be rising more quickly.”

Fed Chair Janet Yellen is winding down record stimulus as the world’s largest economy shows signs of recovering from a first-quarter standstill. At the same time, the Fed repeated that it’s likely to keep the benchmark interest rate near zero for a “considerable time” after bond purchases end.

Policy makers have held the main rate near zero since December 2008. Yellen indicated after the FOMC’s last meeting on March 19 that the central bank may raise interest rates by the middle of next year with the U.S. economy showing signs of strengthening.

The S&P 500 yesterday closed 0.7 percent away from its record reached April 2 as Internet stocks rallied for the first time in five days. The gauge has advanced 0.5 percent in April, poised for a third monthly gain.

 

Internet Stocks 

The Dow Jones Internet Index fell 0.3 percent today, extending its slide from a March high to 17 percent. The Nasdaq 100 gauge of the biggest technology stocks erased a 0.7 percent decline to trade little changed as Apple Inc. added 0.7 percent. The index is still down 0.6 percent this month after a 2.7 percent rout in March amid concern that valuations have outpaced earnings growth spurred a selloff of the shares.

U.S. gross domestic product grew at a 0.1 percent annualized rate from January through March, compared with a 2.6 percent gain in the prior quarter, the data showed. The median forecast of 83 economists surveyed by Bloomberg called for a 1.2 percent increase.

Investors added $3.1 billion to U.S. equity exchange-traded funds yesterday, the biggest single-day inflow since April 8, data compiled by Bloomberg show. Health-care stocks absorbed the most money among industry ETFs, taking in $177 million and paring its five-day net outflow to $399 million.

 

Emerging Stocks

The MSCI emerging-nation gauge trimmed April’s increase to less than 0.1 percent as Russia’s gauge slid 4.6 percent for a fourth straight monthly drop. The EU this week expanded sanctions against individuals close to Putin and companies tied to them, following similar steps by the U.S.

The S&P commodities gauge headed for its worst day since April 1, trimming its advance this month to 0.6 percent.

West Texas Intermediate oil dropped to $99.72 a barrel in New York, near the lowest level in almost four weeks. The Energy Information Administration reported supplies gained 1.7 million barrels to 399.4 million in the week ended April 25.

Gold futures rebounded in New York after the U.S. GDP report boosted demand for the metal as a haven. The metal slid 0.2 percent to $1,293.20 after earlier losing 0.9 percent. Copper dropped 1.5 percent for a second day of losses

 

 

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