Market Indices Displayed at the Tokyo Stock Exchange, Japan (Photographer: Akio Kon/Bloomberg)

U.S. Stocks Climb as Dollar Slumps for Third Day: Markets Wrap

(Bloomberg) -- U.S. stocks advanced while the dollar fell and Treasuries rose as financial markets looked ahead to Wednesday’s inflation report. 

The S&P 500 Index climbed for a third day, its longest winning streak since mid-January, amid a rally in financial shares and food retailers. Assets seen as safe havens gained as last week’s surge in volatility continued to weigh on traders, with the yen set for the strongest close since November 2016 and the Swiss franc up with gold. The dollar’s three-day loss left it at the lowest in more than a week.

Volatility levels remained elevated even after stocks’ modest recovery of the past few days, showing continued unease after the rout that wiped $2 trillion from U.S. shares last week. Consumer-price data due Wednesday could give some clues on where markets are heading, given that pressure on equities has been emanating from the outlook for inflation.

“As we move through the rest of this economic cycle and market cycle, higher volatility is going to be normal,” said Jeffrey Schulze, the chief investment strategist at Clearbridge Investments. “And a lot of that has to do with the normalization of interest rates.”

Hedge funds and other large speculators have boosted bets on Treasury futures to a record, indicating they expect the 2018 bond-market rout will resume in the days ahead. An investor at Goldman Sachs Asset Management warned 10-year yields could rise to as high as 3.5 percent in the next six months as the market prices in a steeper pace of Federal Reserve tightening.

U.S. Stocks Climb as Dollar Slumps for Third Day: Markets Wrap

Elsewhere, European shares dropped following a late downswing in Asia. South Africa’s rand fluctuated as President Jacob Zuma refused to obey his ruling African National Congress’s order for him to resign voluntarily.

Terminal users can read more in our markets blog.

Here are some important things to watch out for this week:

  • Lunar new year celebrations for the Year of the Dog begin, affecting China, Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21. India is out Tuesday for a public holiday.
  • The U.S. consumer-price index probably increased at a moderate pace in January, economists project. Retail sales in the U.S., also out Wednesday, probably increased for a fifth straight month.
  • Japan is expected to extend the longest stretch of economic growth since the mid-1990s when it reports fourth-quarter gross domestic product on Wednesday.
  • Earnings season continues in full swing with reports from Bunge, TripAdvisor, SunPower, Con Edison, Bombardier, MetLife, Cisco, Japan Post Bank, Credit Suisse, Nestle, Airbus, Allianz, Telstra and Coca-Cola.

These are the main moves in markets:

Stocks

  • The S&P 500 rose 0.3 percent at the close of trading in New York.
  • The Stoxx Europe 600 Index fell 0.6 percent.
  • The MSCI All-Country World Index rose 0.3 percent.
  • The MSCI Asia Pacific Index added 0.6 percent.

Currencies

  • The Bloomberg Dollar Spot Index sank 0.4 percent to the lowest in more than a week.
  • The euro climbed 0.5 percent to $1.2358.
  • The Japanese yen gained 0.8 percent to 107.8 per dollar.
  • South Africa’s rand weakened 0.1 percent to 11.9442 per dollar.

Bonds

  • The yield on 10-year Treasuries fell three basis points to 2.83 percent.
  • Germany’s 10-year yield fell one basis point to 0.74 percent.
  • Britain’s 10-year yield rose one basis point to 1.61 percent.

Commodities

  • West Texas Intermediate crude slipped 0.2 percent to $59.20 a barrel.
  • Gold rose 0.5 percent to $1,329.64 an ounce.
  • Copper futures gained 2.5 percent.

©2018 Bloomberg L.P.