Treasury Rates Rise, Gold Falls as U.S. Stocks Fluctuate on Fed

Thursday, 19 December 2013 01:39 PM

Dec. 19 (Bloomberg) -- Treasury 10-year yields climbed to a three-month high and U.S. stocks fluctuated while gold sank following the Federal Reserve’s decision to reduce bond purchases. European stocks rose, catching up with yesterday’s U.S. rally.

Ten-year Treasury yields jumped four basis points to 2.93 percent at 12:28 p.m. in New York. The Standard & Poor’s 500 Index lost 0.1 percent, with stocks most-sensitive to rising interest rates leading declines. The Stoxx Europe 600 Index rose 1.7 percent for its biggest gain in more than three months. Gold slid below $1,200 an ounce for the first time since June, reaching the lowest prices in euros and pounds since 2010. The U.S. dollar rose versus 14 of 16 major peers as the Bloomberg- JPMorgan Asia Dollar Index reached the lowest since September.

The Fed said it will lower its monthly asset purchases to $75 billion from $85 billion, citing an improved outlook for the U.S. employment market. Applications for U.S. unemployment benefits unexpectedly rose last week to an almost nine-month high, showing fluctuation in the filings that typically occurs around the year-end holidays. The Bank of Japan began a two-day policy meeting.

“You’ve got standard post-FOMC volatility,” said Jim Vogel, head of agency-debt research at FTN Financial in Memphis, Tennessee. “There were only so many trades you could do yesterday afternoon, so you were fighting with what other people were doing for their positions.”

U.S. Debt

U.S. government securities due in 10 years or more yielded 1.18 percentage points more than non-U.S. sovereign debt, the most since June 2007, Bank of America Merrill Lynch data show. The rate on 10-year German bunds climbed three basis points to 1.87 percent.

Three rounds of monetary stimulus have helped send the S&P 500 up as much as 168 percent from a 12-year low in 2009. The equities benchmark has surged 27 percent this year, challenging 2003 for the biggest annual gain since 1997.

The S&P 500 rose 1.7 percent to 1,810.65 yesterday and the Dow Jones Industrial Average jumped 292.71 points to a record 16,167.97 as the Fed expressed enough confidence in the labor market to taper asset purchases while still promising to hold interest rates close to zero.

“You had such a sky-rocket yesterday in equities after the Fed announcement and really nothing has changed,” Timothy Ghriskey, who oversees $1.5 billion as the chief investment officer at Solaris Group LLC, said by phone from Bedford Hills, New York. “There’s a little bit of profit-taking off of that emotional spike.”

U.S. Movers

Among stocks moving in the U.S., utilities and industrial companies fell the most among the 10 main groups in the S&P 500. The two industries offer dividend yields of 4.2 percent and 5.6 percent, respectively, and are also the worst performers for the year as rising bond yields compete with their payouts.

Rite Aid Corp. dropped 8.8 percent after cutting its earnings forecast. Facebook Inc. lost 2.5 percent after saying the company and some shareholders, including Chief Executive Officer Mark Zuckerberg, will sell 70 million shares. Oracle Corp. rose 4.9 percent after forecasting third-quarter sales and profit in line with analysts’ estimates.

European Markets

European equities extended their two-day rally to 2.6 percent, the biggest gain since June, as all 19 industry groups in the Stoxx 600 rose. Saab AB surged 32 percent after Brazil’s Defense Ministry agreed to buy 36 Gripen NG fighter jets for $4.5 billion. The Swedish company beat Boeing Co. to supply the airplanes through 2023. Boeing shares slipped 0.4 percent.

Mediaset SpA jumped 16 percent, the biggest gain on the Stoxx 600, after Deutsche Bank AG said that the Italian broadcaster’s plan to spin off its pay-TV business could increase the company’s profitability. A stand-alone company could attract an outside investor to share the cost of the rights to screen live soccer, the brokerage wrote.

Algeta ASA advanced 1.4 percent after Bayer AG agreed to buy the Norwegian drugmaker for 362 kroner a share, or 17.6 billion kroner ($2.9 billion). The German company made a preliminary offer of 336 kroner apiece in November.

Gold futures traded in New York dropped as much as 3.5 percent to $1,197.50 an ounce, the lowest price since June 28. Gold for immediate delivery fell 1.7 percent. U.S. natural gas rallied 4.4 percent to $4.439 per million British thermal units after a government report showed a record drop in U.S. inventories.

Indonesia’s Rupiah

Indonesia’s rupiah weakened as much as 0.6 percent to 12,236 per dollar, while the Bloomberg-JPMorgan Asia Dollar Index slipped 0.3 percent to 115.61. The Bloomberg U.S. Dollar Index added 0.2 percent, rising for a third straight day.

Turkey’s benchmark stock index, the Borsa Istanbul 100 Index, slid 3.2 percent to extend its decline for the week to almost 7 percent. Prime Minister Recep Tayyip Erdogan’s government transferred police officers involved in a corruption probe, Yeni Safak newspaper reported, as opposition lawmakers accused the state of trying to bury the case.

--With assistance from Matthew Brown, Claudia Carpenter, Shelley Smith, Paul Dobson, Sofia Horta e Costa and Will Hadfield in London. Editors: Michael P. Regan, Jeff Sutherland

To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net; Daniel Kruger in New York at dkruger1@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

© Copyright 2018 Bloomberg News. All rights reserved.

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Gold futures traded in New York dropped as much as 3.5 percent to $1,197.50 an ounce, the lowest price since June 28. Gold for immediate delivery fell 1.7 percent.
Thursday, 19 December 2013 01:39 PM
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