Market corrects in front of Fed

U.S. stocks fell as weaker retail forecasts damped optimism about the economy, while the dollar gained and Treasuries slid before the release of Federal Reserve minutes. European equities retreated and the pound rose.

The Standard & Poor’s 500 Index dropped 0.2 percent at 9:31 a.m. in New York after rallying yesterday to within 0.3 percent of a record. Target Corp. and Lowe’s Cos. dropped at least 1.7 percent after cutting forecasts. Ten-year Treasury yields added one basis point to 2.41 percent. The dollar strengthened to an 11-month high versus the euro, while the pound appreciated against all of its 16 major peers. The Stoxx Europe 600 Index fell 0.3 percent. Argentina’s bonds sank to a two-month low.

The Fed minutes may give investors more clues on the outlook for U.S. interest rates, after data yesterday showed inflation remains below target, even as the housing market gathers steam. Chair Janet Yellen will address global central bankers this week at a symposium in Jackson Hole, Wyoming. Bank of England Governor Mark Carney lost his consensus on not raising interest rates as two policy makers broke ranks.

“There’s some resistance with trading at key levels in the S&P near July highs, Fed minutes coming out and the start of the central banker meeeting in Jackson Hole,” Todd Salamone, senior vice president of research at Cincinnati-based Schaeffer’s Investment Research, said in a phone interview. “If something comes out from Yellen in terms of raising rates sonner than expected, that could impact markets in a negative manner.”


Jackson Hole

Investors will scrutinize the minutes from the July 29-30 Fed meeting to gauge whether improving economic data has made policy makers more inclined to pull forward the timing of any rate increase. The Fed remains on pace to wind down its monthly bond purchases in October, while Yellen has said officials will keep the benchmark interest rate low for a “considerable time” after that.

Yellen will speak on labor markets Aug. 22 in Jackson Hole. Policy makers including European Central Bank President Mario Draghi will also speak.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, advanced 0.2 percent to 1,025.37. The gauge earlier rose to 1,025.85, the highest since Feb. 7. The pound strengthened 0.5 percent to 79.80 pence per euro, and advanced 0.2 percent to $1.6649.

The yen weakened to 103.25 per dollar after slipping 0.3 percent last session. Japan said exports rose 3.9 percent from a year earlier in July, exceeding the 3.8 percent increase forecast by economists. Imports also unexpectedly grew.


European Assets

Europe’s higher-yielding bonds advanced, with rates on Italian and Spanish 10-year securities dropping to records. Italian 10-year yields fell three basis points to 2.57 percent, after touching 2.561 percent, the lowest since Bloomberg started collecting the data in 1993.

In European equity markets, the Stoxx 600 fell today after rising 1.8 percent in the past two days. Heineken NV surged 7.8 percent as the world’s third-biggest brewer posted profit in the first half that topped analysts’ estimates. Carlsberg A/S slumped 3.8 percent after the biggest brewer in Russia cut its full-year earnings outlook amid mounting economic difficulties in eastern Europe.

Bank of China, the country’s fourth-largest bank, slid 0.3 percent in Hong Kong. The lender boosted the amount of money it sets aside for bad loans as it reported the slowest rate of profit growth for five quarters yesterday.


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