U.S. stocks fell and Treasuries capped the longest losing streak this year after data showing retail sales climbed bolstered the case for the Federal Reserve to raise interest rates. Brent crude sank to a two-year low.
The yield on the 10-year Treasury note jumped six basis points to a two-month high of 2.61 percent at 4 p.m. in New York. The bonds have fallen seven straight days. The Standard & Poor’s 500 Index (BCOM) lost 0.6 percent, capping its first weekly drop in six. Emerging-market stocks lost 0.7 percent for a seventh day of declines. The Bloomberg Commodity Index sank to a five-year low as Brent crude lost 1 percent.
Sales at U.S. retailers climbed 0.6 percent in August, the fastest pace in four months, boosting speculation the Fed will signal a move toward raising rates
at its meeting next week. Separate data showed consumer confidence in the U.S. rose more than estimated. Russia threatened retaliation against a U.S. and European Union decision to stiffen sanctions, saying the move to expand penalties undermines the peace process in Ukraine.
“Today’s retail sales and consumer confidence data fall into the argument of those who believe the Fed lift-off date may come sooner,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which oversees $67 billion in assets, said by phone. “The worry is if the Fed has to lift rates sooner rather than later, there’s the question of when, but also what the trajectory of interest-rate increases will be and if it will undermine this sanguine picture of equities as the only game in town.”
There’s a 60 percent chance the U.S. central bank will increase its benchmark by July 2015, federal fund futures show, up from a 54 percent chance a month ago. The yield on Treasuries due in a decade climbed 15 basis points this week.
Rate Timing
The S&P 500 declined 1.1 percent this week, the first loss since Aug. 1, on concern the Fed may raise rates early next year as the economic recovery strengthens. Retail sales rose 0.6 percent last month, and the Thomson Reuters/University of Michigan preliminary consumer sentiment index (BGSV) climbed to 84.6 in September.The Fed, which meets Sept. 16-17, is considering the timing of rate increases and whether to revamp its public guidance on the path of rates. The central bank has said since March that interest rates would stay low for a “considerable time” after it completes a monthly bond-buying program that’s on track to end this year.
Among stocks moving today, energy shares tumbled 1.5 percent, extending a decline this week to 3.7 percent as crude prices have tumbled on concern that global oil demand is slowing. Utility stocks in the S&P 500 fell 1.8 percent lost 1.6 percent.
Alibaba IPO
Yahoo! Inc. rose 3.9 percent to the highest since January 2006 after Alibaba Group Holding Ltd. received enough demand for its initial public offering that it plans to stop taking orders, according to people with knowledge of the matter. Yahoo is set to get an $8 billion windfall from the IPO.The Europe Stoxx 600 was unchanged after a five-day losing streak. The gauge capped its first weekly decline in more than a month.
The rate on 10-year German bunds climbed four basis points to 1.08 percent, while the yield on similar-maturity French notes rose for a fifth day. The Bloomberg Global Developed Sovereign Bond Index fell 2.2 percent in the past two weeks, the worst performance since June 2013.
The MSCI Emerging Markets Index retreated 0.7 percent. The gauge fell every day this week to drop 3.2 percent. The Ibovespa fell 1 percent, after a voter poll showed opposition candidate Marina Silva tied with President Dilma Rousseff in a second round of October’s election in Brazil.
Russia Sanctions
Russia’s Micex Index rose 0.6 percent, paring an earlier advance of 1.4 percent. The U.S. expanded sanctions against the country to include its largest bank, OAO Sberbank, and energy companies as well as five state-owned defense and technology companies.Russia’s Economy Ministry drafted a list of goods that may be banned in retaliation, including automobile imports, particularly used cars, as well as textiles and clothing, state-run RIA Novosti reported, citing Kremlin economic aide Andrei Belousov.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, added 0.1 percent to July 2013. The gauge advanced 1.2 percent this week, the most since the period ended Nov. 1.
“There has been quite a significant shift in terms of interest-rate expectations in the U.S.,” said Mitul Kotecha, the Singapore-based head of Asia-Pacific foreign-exchange strategy at Barclays Plc. “Higher U.S. yields combined with the relative outperformance of U.S. data is helping to propel the dollar forward.”
The Bloomberg Commodity Index of 22 raw materials fell 0.3 percent to the lowest since July 2009 for a fifth straight loss. Wheat declined for a fifth day to trade at the lowest in four years after the government forecast record global harvests.
Brent crude fell amid speculation that global fuel consumption is slowing while production climbs. The commodity slid 1 percent to $97.11, t he lowest since June 28, 2012.
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