Janet Yellen, chair of the U.S. Federal Reserve, speaks during a House Financial Services Committee hearing in Washington, D.C., U.S. (Photographer: Andrew Harrer/Bloomberg)  

S&P 500 Trades Near High on Fed Bets Amid Mixed Data; Oil Climbs  

(Bloomberg) -- U.S. stocks traded near a record high, while the dollar fell after mixed data in the world’s largest economy bolstered speculation the Federal Reserve will be in no rush to raise interest rates. Oil climbed.

Dissonant reports showing a surge in American new home sales and a slowdown in manufacturing did little to sway traders toward bets on higher borrowing costs as they awaited a Friday speech from Fed Chair Janet Yellen. While the S&P 500 Index rose amid surprising earnings from Best Buy Co., both volatility and trading volume with U.S. shares lacked momentum. The greenback halted a two-day advance, and Treasury 10-year notes were stuck in the tightest monthly trading range since 2006. Oil rallied on speculation Iran may be more willing to cooperate with producers seeking to freeze output.

Investors’ sentiment has shifted back and forth in recent weeks on how aggressive the Fed will be in its approach to monetary tightening after it raised borrowing costs in December for the first time since June 2006. The still mixed economic reports reflect a dimming outlook for the U.S. central bank to raise interest rates now and diverge from increased monetary stimulus in Europe and Asia. There’s only a 26 percent chance of a hike in September, according to data compiled by Bloomberg based on fed fund futures.

“We’re crawling toward another high, and it’s all about being in this sweet spot where everything is working well, but not overheating,” said Larry Peruzzi, managing director of international equities at Mischler Financial Group Inc. in Boston. “Now everybody’s looking to Yellen’s testimony on Friday.”

Even as the S&P 500 hovers near its all-time high, U.S. stock volatility is close to a two-year low. A similar index that tracks the swings with U.S. Treasury notes has tumbled 26 percent from its June peak. Earlier this month, a JPMorgan Chase & Co. index tracking three-month currency volatility fell to its lowest since late 2015. While the measure has climbed since then, it’s still 6 percent below its average this year.

Stocks

The S&P 500 rose 0.3 percent at 1:35 p.m. in New York. Equities showed signs of breaking out of a recent torpor, with Monsanto Co. leading a rally in raw materials as it’s said to be closer to a merger with Bayer AG. Chipmakers extended their recent gains to boost the technology group, and Best Buy surged 18 percent, lifting retailer stocks.

The benchmark gauge for American shares had barely moved in the prior four sessions as investors assessed stretched valuations and hawkish signals from policy makers, while the earnings season came near a close.

“The earnings season is largely over and the only thing we can look at is Fed-speak which is antagonizing,” Brian Frank, portfolio manager at Key Biscayne, Florida-based Frank Capital Partners LLC, said by phone. “We’re in the most aggressive dip-buying market I’ve ever seen. I wouldn’t even call the last two days a dip, but any little tiny decline seems to be an excuse to buy and talk about the Fed.”

European shares rose the most in two weeks as commodity producers rebounded on higher metals prices, and data pointed to continuing economic progress in the region. BHP Billiton Ltd. and Anglo American Plc led miners to the best performance of the 19 industry groups on the equity gauge as iron ore in China jumped to a two-week high

Currencies

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, fell 0.1 percent after rising 0.6 percent in the previous two days. The greenback lost 0.2 percent to 100.11 yen, and was little changed at $1.1321 per euro.

“The way investors are starting to get biased right now is that yes, maybe we get a little bit of a boost to the dollar from this one hike this year, but if the longer-term picture is still relatively benign, this supports risk sentiment” and works against the dollar, Vassili Serebriakov, a foreign-exchange strategist at Credit Agricole CIB in New York, said in a Bloomberg TV interview. “The bias is still for Yellen to be quite dovish, and if there’s a risk of a surprise, maybe it’s a little less dovish than more dovish.”

Emerging-market currencies rebounded from a two-day slide, led by South Africa’s rand. Turkey’s lira sustained gains against the dollar after the central bank lowered interest rates in line with analyst expectations, and said it expects inflation to ease gradually.

Bonds

Benchmark Treasury 10-year note yield was little changed at 1.55 percent, according to Bloomberg Bond Trader data. The yield has been in a range this month of 15 basis points, the narrowest on a closing-price basis since February 2006.

“It’s a wait-and-see kind of mode for Treasuries,” said Orlando Green, a rates strategist at Credit Agricole SA’s corporate and investment-banking unit in London. The 1.60 percent level on Treasury 10-year yields “seems to be an area where the market can’t seem to break through,” he said. “It may need something a little bit stronger from Yellen.”

Tuesday’s $26 billion U.S. two-year note sale drew a yield of 0.76 percent. Direct bidders, non-primary-dealer investors that place bids with the Treasury, purchased 25.2 percent, the highest allocation since May and exceeding the 16.3 percent average at the previous 10 auctions.

The yield premium that investors demand for holding Italian 10-year debt instead of benchmark German bunds has widened from a four-month low reached on Aug. 15. Already struggling with sluggish growth and a banking crisis, Italy is heading for a referendum as Renzi attempts to overhaul the constitution. He has pledged to step down if the vote goes against his proposed measures. Portugal’s 10-year bonds fell for a sixth day as the nation’s sovereign rating comes under scrutiny.

Commodities

Oil rose as much as 2.7 percent after Reuters reported that Iran is sending “positive signals” that it may support joint action to bolster the oil market, citing unidentified sources in OPEC and the oil industry. Iran hasn’t decided whether to join any action, according to the sources. If OPEC and some other producers agree to cap output at informal talks next month, the resulting price boost may help other suppliers revive output, Goldman Sachs analysts wrote.

“This is just more jawboning,” said Sarah Emerson, managing director of ESAI Energy Inc., a consulting company in Wakefield, Massachusetts. “Iran, Iraq and Saudi Arabia are the OPEC members that everyone is listening to. The market will react to any news that comes from them.”

West Texas Intermediate for October delivery rose 38 cents, or 0.8 percent, to $47.79 a barrel on the New York Mercantile Exchange, after dropping 1.7 percent earlier.