Treasuries Tumble, Dollar Rallies on Yellen Talk: Markets Wrap

(Bloomberg) -- The dollar rallied while Treasuries plunged after Janet Yellen signaled the Federal Reserve stands ready to raise interest rates if the economy strengthens as the central bank anticipates. U.S. stocks were mixed amid corporate results.

The yield on 10-year Treasury notes rose the most in a month, while the dollar spiked 1.1 percent after the Fed chair said economy is “close” to the central bank’s objectives and she’s confident it will continue to improve. Data showing a fifth straight monthly advance in the U.S. cost of living bolstered arguments that inflation is taking hold. The Fed remarks sent the S&P 500 Index to its session high after it spent the day fluctuating. The Mexican peso and Canadian dollar tumbled after U.S. president-elect Donald Trump’s commerce pick said renegotiating Nafta will be a priority.

Yellen jolted markets as she signaled the Fed won’t hesitate to tighten policy if economic growth accelerates as anticipated. The comments came a day after concerns about Trump’s policies and the implications of Brexit drove investors to haven assets. Rising consumer prices in the U.S. joined data showing strengthening inflation in the U.K. and eurozone, underpinning confidence in a growth.

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Here are the main movers for the key asset classes:

• Yields on 10-year Treasuries climbed 10 basis points to 2.42 percent, after falling seven on Tuesday. It was the biggest advance since Dec. 14.
• The Bloomberg Dollar Spot Index surged 1.1 percent, the most in a month.
• The S&P 500 rose 0.2 percent to 2,271.87 at 4 p.m. in New York, 0.2 percent below its all-time high set Jan. 6.
• The Dow Jones Industrial Average fell 22.05 points to 19,804.72. The index is down almost 1 percent since Jan 6, when it climbed within one point of 20,000.
• Goldman Sachs Group Inc. fell 0.6 percent, while Citigroup Inc. retreated 1.7 percent. Both banks reported profit that topped estimates as bond trading buoyed results. Target Corp. lost 5.8 percent after cutting its holiday sales forecast.
• The MSCI Emerging Markets Index slipped 0.1 percent, after earlier rising to the highest closing level since Nov. 8. 
• The Bloomberg Commodity Index halted a five-day rally, retreating 0.6 percent.
• West Texas Intermediate crude slumped 2.2 percent to $51.31 a barrel, the most in a week.
• Gold futures lost 0.7 percent, snapping a seven-day winning streak that was the longest since November.

--With assistance from Adam Haigh Min Jeong Lee David Goodman Andrew Reierson Samuel Potter and Natasha Doff To contact the reporter on this story: Jeremy Herron in New York at jherron8@bloomberg.net. To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Jeremy Herron, Cecile Gutscher