Treasuries Slip on Fed Rate Bets, Stocks Mixed: Markets Wrap

(Bloomberg) -- U.S. stocks were mixed as a tone of caution spread through financial markets before Donald Trump’s address to Congress Tuesday night. Treasuries fell after two Federal Reserve officials suggested rates could rise as soon as the March meeting.

The yield on 10-year Treasuries added three basis points in late trading after Fed Bank of San Francisco President John Williams said he expects an interest-rate increase to receive “serious consideration” and New York’s William Dudley said a hike will come “fairly soon.” The odds for higher borrowing costs in two weeks rose above 50 percent.

The comments stole a measure of attention from Trump’s highly anticipated policy speech that has been dominating market moves for days. Most American equities retreated from all-time highs, with small caps sliding the most in a month while the Dow Jones Industrial Average narrowly missed extending its run of record closes. Bloomberg’s measure of the greenback erased losses to close higher. Crude retreated with gold.

With Trump set to deliver his first major policy speech to Congress at 9 p.m. in Washington, speculation on whether he’ll deliver details or be able to convince lawmakers to go along with his proposals had investors unwilling to add to riskier bets with stocks near all-time highs.

“Tonight is going to be about laying out the agenda,” Paul Kavanagh, chief executive officer of Patronus Partners Ltd. in London, said in an interview on Bloomberg radio. “The bond markets and the stock markets are going to be listening. To push through on many of the initiatives that he’s looking for over the next few months, he’s got to be relatively downbeat about the things that he will want to change.”

Read our Markets Live blog here.

What’s coming up this week:

• Trump is expected to outline his priorities for the nation in an address before a joint session of Congress on Tuesday night in the U.S.
• Fed officials are making speeches this week, including Chair Janet Yellen who addresses an event in Chicago on Friday.
• This week’s economic data include U.S. personal income and spending. India and Australia will report on fourth-quarter GDP. China’s PMI data are expected to show continued expansion.

Here are the main moves in markets:

Stocks

• The S&P 500 Index declined 0.3 percent to 2,363.88 at 4 p.m. in New York, paring the best monthly gain since March to 3.7 percent.
• The Dow halted a record-matching streak of closing at all-time highs that reached 12. The blue-chip index jumped 4.8 percent in February, for a fourth straight monthly advance.
• The Stoxx Europe 600 Index added 0.2 percent after four straight days of losses. The measure pared its gain in the month to 2.8 percent.
• Asia stocks erased gains after Japan’s Topix gave up almost all of a 1 percent rise, with the steepest paring coming in the final half hour of trading. The MSCI Asia Pacific Index trimmed its monthly gain to 2.2 percent.

Currencies

• The Bloomberg Dollar Spot Index rose 0.1 percent.
• The yen added 0.3 percent to 112.385 per dollar, after sliding 0.5 percent Monday to snap a three-day winning streak. 
• The British pound slipped 0.3 percent to $1.2403. The currency is down 1.3 percent for the month.

Bonds

• Yields on 10-year Treasuries rose three basis points to 2.39 percent after climbing five basis points on Monday.
• European government bonds traded in a tight range. The German 10-year yield rose one basis point to 0.21 percent. Peripheral bonds extended Monday’s gains as 10-year Italian yields fell three basis points to 2.1 percent.

Commodities

• West Texas Intermediate Crude fell 0.2 percent to $53.95 a barrel. Brent Crude retreated 0.6 percent to $55.59.
• Gold climbed less than 0.1 percent to $1,253.49 an ounce. The metal has gained 3.5 percent in February, its second monthly advance.

--With assistance from Natasha Doff Simon Ballard and Vassilis Karamanis

To contact the reporters on this story: Jeremy Herron in New York at jherron8@bloomberg.net, Robert Brand in Cape Town at rbrand9@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Samuel Potter at spotter33@bloomberg.net, Christopher Anstey at canstey@bloomberg.net.