US stocks fall with Treasuries

U.S. stocks fell with Treasuries, while the dollar (NYBOT:DX) advanced after data showed U.S. inflation quickened as the Federal Reserve begins a policy meeting. Crude dropped on signs Iraq violence may not disrupt supplies.

The S&P 500 slipped 0.1 percent at 9:30 a.m. in New York following two days of gains. The Stoxx Europe 600 Index was little changed after erasing earlier gains. The rate on two-year Treasury notes touched 0.49 percent, the highest since September. West Texas Intermediate crude (NYMEX:CLN14) fell 0.3 percent and gold (COMEX:GCN14) dropped 0.7 percent. The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, added 0.3 percent.

Fed policy makers start a two-day meeting today as a report showing an increase in consumer prices signaled inflation will move closer to the bank’s 2 percent goal. Separate data showed housing starts declined in May. The Fed will probably raise rates faster than money-market investors expect, based on a Bloomberg News survey of economists. Iraq’s military said it repelled an attack by an al-Qaeda breakaway group. The nation’s crude output hasn’t been hurt by the violence, the International Energy Agency said today.

“Investors are in this holding period,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which oversees $65 billion in assets, said by phone. “We’re not seeing anything overwhelmingly bad, but we’re also not seeing any overwhelmingly good news. You’ve got two readings that were a little unsettling today and that fits with the lack of balance we’ve been seeing in the data.”

Bond yields

Treasury 10-year note yields jumped three basis points to 2.63 percent, while the rate on similar-maturity German bunds increased three basis points to 1.38 percent. Portugal’s 10-year yield climbed four basis points to 3.46 percent.

The Stoxx 600 closed at its lowest level since June 5 yesterday. Automakers Renault SA and Daimler AG climbed 0.6 percent and 0.3 percent, respectively, today after data showed European car sales increased.

Whitbread Plc gained 2.2 percent after sales at its Premier Inn hotels and Costa Coffee chain topped analysts’ estimates. Shire Plc rose 2.4 percent after a Reuters report said the pharmaceutical company hired Citigroup Inc. as it may receive takeover offers.

Gold for immediate delivery retreated to $1,261.77 an ounce. Silver (COMEX:SIN14) dropped 0.6 percent to $19.5546 an ounce.

Fed policy

The Fed will reduce the pace of monthly asset purchases by $10 billion to $35 billion, economists project. Some 62 percent of 58 economists in a Bloomberg survey predict the Fed will halt bond buying at its October meeting.

A report in Washington showed the number of new homes started in the U.S. dropped to a 1.001 million annualized rate in May from a 1.071 million pace in April. The consumer price index increased 0.4 percent in May after rising 0.3 percent the previous month, separate data showed.

A pickup in inflation lessens the threat of a prolonged drop in prices that hurts economic growth, giving Fed officials reason to continue to scale back their unprecedented bond-buying program. Continued hiring and faster wage gains will be needed to boost demand and enable consumers to cope with higher prices.

WTI for July delivery slid to as low as $106.01 a barrel in New York. Prices capped a 4.1 percent increase last week, the most since December, when escalating violence in Iraq fanned concern that supplies from OPEC’s second-largest producer may be disrupted.

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