Dollar Rallies on Fed Outlook as Dow Tests 23,000: Markets Wrap

(Bloomberg) -- The dollar strengthened to a one-week high on speculation the next Federal Reserve chairman will be more hawkish as the Dow Jones Industrial Average briefly topped the 23,000 level for the first time.

The blue-chip equity gauge, which closed just shy of the big round number, was lifted by earnings that beat estimates at UnitedHealth Group Inc. and Johnson & Johnson. The S&P 500 also edged higher. Gold and copper declined, sending a measure of commodities to the biggest drop in a week.

John Taylor, who is known for a policy rule that would suggest higher interest rates were he to replace Janet Yellen, was said to have impressed President Donald Trump in an interview last week. That prompted investors to lift bets on a rate increase in December, and sent the dollar up versus all the Group of 10 currencies. A host of Fed speakers and the publication of the Beige Book this week may provide further clues about the U.S. policy path.

U.S. homebuilders’ confidence rebounded to a five-month high, indicating concern over fallout from major hurricanes has been alleviated. U.S. factory production rose last month for the first time since June.

The pound weakened after Governor Mark Carney said the Bank of England is making contingency plans for a “hard” exit from the European Union. The euro slumped after Spain cut its growth forecast for 2018 to 2.3 percent from 2.6 percent, acknowledging the impact of an escalating political crisis in Catalonia, a region that accounts for a fifth of the country’s output. The Spanish state is turning up the pressure on separatist leaders to drop their push for independence.

Terminal subscribers can read more in our Markets Live blog.

Here are some key events coming up this week:

• Among Fed speakers lined up this week are Philadelphia Fed President Pat Harker on Tuesday, and New York Fed President Bill Dudley and Dallas Fed President Robert Kaplan on Wednesday.
• China releases data for GDP, industrial production and retail sales on Thursday.

Here are the main moves in markets:

Stocks

• The S&P 500 rose 0.1 percent at the close in New York.
• The Dow Jones Industrial Average rose 0.2 percent to 22,997.44.
• The Stoxx Europe 600 closed 0.3 percent lower.
• The MSCI Emerging Market Index sank 0.4 percent, the first retreat in more than a week.

Currencies

• The Bloomberg Dollar Spot Index gained 0.2 percent
• The euro dipped 0.3 percent to $1.1767. 
• The British pound declined 0.5 percent to $1.3185. 
• The Japanese yen was little changed at 112.22 per dollar.

Bonds

• The yield on 10-year Treasuries was little changed at 2.3 percent. 
• Britain’s 10-year yield fell six basis points to 1.27 percent. 
• Spain’s 10-year yield fell two basis points to 1.53 percent.

Commodities

• West Texas Intermediate rose 0.2 percent to $52 a barrel 
• Gold declined 0.8 percent to $1,285.97 an ounce. 
• Copper sank 1.2 percent to $3.2015 a pound, the first retreat in more than a week.

--With assistance from Adam Haigh Andreea Papuc Garfield Reynolds Robert Brand Cormac Mullen and Richard Richtmyer

To contact the reporter on this story: Brendan Walsh in Austin at bwalsh8@bloomberg.net.

To contact the editor responsible for this story: Jeremy Herron at jherron8@bloomberg.net.