US Economy

Treasuries Drop With Gold; Dollar Gains, Stocks Fluctuate

Treasuries and gold fell while the dollar rallied as better-than-forecast reports on business activity and consumer confidence bolstered speculation the Federal Reserve will scale back its bond purchases. U.S. stocks fluctuated at the end of a seventh straight monthly gain.

Ten-year Treasury yields increased three basis points to 2.14 percent and the Dollar Index, a gauge of the currency against six major peers, jumped 0.4 percent to 83.39 at 12:03 p.m. in New York. The Standard & Poor’s 500 Index swung between gains and losses near the 1,654 level, poised for a monthly advance of 3.5 percent. The Stoxx Europe 600 Index dropped 0.9 percent. The S&P GSCI gauge of 24 commodities slid for a third day, losing 0.7 percent as gold and oil fell more than 1 percent.

Government bonds are headed for the worst month since 2004 as investors weigh prospects that the Fed will taper asset purchases as the economy improves. Business activity in the U.S. rebounded in May, with the MNI Chicago Report’s barometer rising to 58.7 to exceed all forecasts in a Bloomberg survey and reach the highest since March 2012. The Thomson Reuters/University of Michigan final index of sentiment increased to 84.5 in May, the strongest since July 2007.

“This is actually saying the economy is expanding,” said Michael Franzese, senior vice president of fixed-income trading at ED&F Man Capital Markets in New York. “It puts the Fed in check. They are not sure what to do. Views are all over the place, legitimately.”

Bonds, Stocks

U.S. two-year note yields rose one basis point to 0.30 percent and 30-year rates increased four basis points to 3.31 percent. The dollar strengthened against 14 of 16 major peers, climbing 0.6 percent to $1.2975 per euro.

The seven-month rally in the S&P 500 is the longest stretch of gains since 2009. The gauge has retreated about 1 percent from a record high on May 21 as investor’s debate the Fed’s plans.

Another report today showed household purchases, which account for about 70 percent of the economy, dropped 0.2 percent last month, the Commerce Department reported. The economy grew an annualized 2.4 percent pace in the first quarter, down from a preliminary reading of 2.5 percent, government data released yesterday showed.

Alcoa Inc., Intel Corp. and DuPont Co. rose more than 1 percent for the biggest gains in the Dow Jones Industrial Average today. Pall Corp. retreated 3.8 percent after lowering its earnings forecast. American International Group Inc. slid 2.5 percent after saying it hasn’t received a deposit in the sale of its plane-leasing unit. Netflix Inc. rallied 2.1 percent on a report that it will be added to the Nasdaq 100 Stock Index in June. Dell Inc. climbed 0.8 percent as shareholders sued founder Michael Dell, the company’s board and private-equity partners over their bid to take the computer maker private.

Changes by MSCI Inc. to its global and U.S. equity indexes will be implemented at the close of trading today. The process known as rebalancing can lead to swings in affected stocks. The additions and deletions of stocks to gauges such as the MSCI All-Country World Index and the MSCI World Index of developed-market equities were announced on May 15.

Almost four shares retreated for every one that gained in the Stoxx 600 today, as 18 of 19 industry groups fell. The index has rallied for the past 12 months, the longest winning streak since 1997.

European Movers

Royal KPN NV, the Dutch phone operator, and Salzgitter AG (SZG), Germany’s second-largest steelmaker, dropped more than 4 percent as analysts downgraded the shares. PostNL NV rallied 6.9 percent after the Dutch mail-delivery company raised its profit forecast.

The MSCI Emerging Markets Index fell 0.7 percent, declining 3.2 percent in May, the most in a year. India’s Sensex slid 2.3 percent, its biggest daily slump in more than a year, after the economy grew less than 5 percent for a second quarter. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong sank 0.9 percent before a manufacturing report tomorrow.

To contact the reporters on this story: Michael P. Regan in New York at mregan12; Susanne Walker in New York at swalker33

To contact the editor responsible for this story: Lynn Thomasson at lthomasson