Treasuries fell and the pound strengthened on speculation that central banks may raise interest rates sooner than forecast. U.S. stocks fluctuated with oil as deals and a rally in Intel Corp. (NASDAQ:INTC) offset concern over Iraq.
The yield on 10-year Treasuries rose 2 basis points to 2.62 percent at 10:07 a.m. in New York, with the yield curve approaching its flattest level in almost five years. Sterling reached the strongest level in 19 months against the euro and gilts tumbled as Bank of England Governor Mark Carney signaled interest rates may rise sooner than investors expected. The Standard & Poor’s 500 Index dropped 0.1 percent, while West Texas Intermediate (NYMEX:CLN14) crude increased 0.1 percent.
Carney’s comments contrast with the European Central Bank, which announced additional economic stimulus last week. Consumer confidence unexpectedly fell in June to a three-month low, adding to signs of a more restrained pickup in the second- quarter economy. Government forces in Iraq, OPEC’s second- biggest oil producer, are seeking to dislodge Islamist militants from cities north of Baghdad after they overran army positions in Mosul this week.
“You have a hawkish statement out of a central bank,” said Ira Jersey, an interest-rate strategist in New York at Credit Suisse Group AG, one of 22 primary dealers that trade directly with the Fed. “That could mean the Fed may not be too far behind."
Longer-maturity bonds have outperformed this week, as signs the U.S. recovery is uneven helped bolster demand for safer assets with extra yield. The difference between five- and 30- year yields fell toward the narrowest since 2009.
The S&P 500 yesterday fell for a third day, its longest losing streak in two months, as data on jobless claims and retail sales fell short of estimates. The S&P 500 has advanced 6.3 percent since a low on April 11 as data showed the economy is recovering from the impact of extreme weather earlier this year.
Intel surged 6.4 percent after raising its sales forecasts for the second quarter and the full year. Express Inc. (NYSE:EXPR) rose 20 percent after Sycamore Partners said it plans to buy the clothing chain. OpenTable Inc. (NASDAQ:OPEN) jumped 47 percent after Priceline Group Inc. (NASDAQ:PCLN) agreed to buy the online restaurant reservation company for $2.6 billion in cash.
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