U.S. Stocks Slip as Oil Rally Eases With Bond Rout; Gold Climbs

(Bloomberg) -- Most U.S. stocks retreated as a rally that took crude oil to the highest price in 17 months eased, with the focus shifting to the Federal Reserve’s forthcoming policy meeting. Treasuries pared declines that pushed 10-year yields above 2.5 percent for the first time since 2014.

While energy stocks jumped with utilities, losses in bank shares saw the S&P 500 Index slip in afternoon trading Monday. A gauge of small-cap companies retreated by more than 1 percent as benchmark indexes in the U.S. fell from record highs, even as blue-chip shares advanced. Oil climbed 2.6 percent, paring a rally that exceeded 5 percent on a deal to cut output between OPEC and other producers. Chinese shares sank the most since June amid concern the nation’s property market is in poised to decline. Gold increased.

The oil deal lit a fire under crude prices, fueling an increase in investors’ expectations for global inflation and exacerbating a bond rout that had been supercharged by Donald Trump’s victory in the U.S. election. The prospect of increased price pressures is coloring the market’s outlook for central-bank policy, with traders seeing 100 percent odds of a rate hike from the Fed this week, and a two-in-three chance of additional policy tightening by June, according to Bloomberg calculations based on Fed fund futures.

Stocks

• The S&P 500 Index fell 0.1 percent to 2,2256.96 as of 4 p.m. in New York, after rising 3.1 percent last week. 
• The Dow Jones Industrial Average climbed 0.2 percent and briefly topped 19,800, while the Nasdaq 100 Index slumped 0.6 percent.
• The Stoxx Europe 600 Index fell 0.5 percent in the wake of its steepest weekly rally in almost two years. Still, commodity producers and miners gained, with the Stoxx 600 Oil & Gas Index up 2.2 percent.
• The MSCI Emerging Market Index dropped 0.5 percent for a second straight day of declines.
• Most Asian index futures signaled losses for Tuesday, with Nikkei 225 Stock Average futures down 0.8 percent in Osaka.

Commodities

• West Texas Intermediate crude climbed to $52.83 a barrel after earlier climbing above $53. Brent oil futures added $1.36 to $55.69. Both contracts settled at their highest prices since July last year.
• The deal between OPEC members and outside nations, including Russia, was agreed at a meeting in Vienna at the weekend. It should usher in the first global petroleum cuts in 15 years and covers about 60 percent of the world’s output.
• Copper futures slumped 1.5 percent, erasing a gain of as much as 1.4 percent after data showed London Metal Exchange inventories rose the most since June.
• Gold futures rebounded after sliding to a 10-month low as the Fed prepares to raise rates, damping the metal’s appeal as a store of value.
  
  

Bonds

• Ten-year Treasury yields rose as much as six basis points before paring the advance to be up one basis point at 2.48 percent.
• Hedge funds and other large speculators raised bearish bets on 10-year Treasuries to the highest level in almost two years last week, more than doubling them to a net 228,604 contracts, according to the latest Commodity Futures Trading Commission data.
• Germany’s yield curve, as measured by the spread between two- and 30-year bonds, reached its widest point since 2014, based on closing prices, while a similar gauge for Japan expanded for a fifth day.
• Ten-year U.K. bond yields climbed four basis points, or 0.04 percentage point, to 1.49 percent.

Currencies

• Oil-exporting currencies lead gains against the dollar, with the Russian ruble gaining 2.4 percent and the Norwegian krone and Mexican peso advancing at least 0.8 percent
• The euro gained 0.7 percent to $1.0633, after dropping 1 percent last week.
• Japan’s yen gained 0.3 percent to 115 per dollar, halting a two-day retreat.

--With assistance from Ben Sharples Charlotte Ryan Lynn Thomasson Aleksandra Gjorgievska and Emma O'Brien To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net, Jeremy Herron in New York at jherron8@bloomberg.net. To contact the editors responsible for this story: Emma O'Brien at eobrien6@bloomberg.net, Jeremy Herron