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Dollar weakens, Treasuries advance, U.S. stocks fluctuate

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(Bloomberg) — The dollar slid to a seven-week low as the yen strengthened and falling Treasury yields boosted demand for emerging-market currencies. U.S. stocks fluctuated, with the Standard & Poor’s 500 Index poised for a weekly loss.

The Bloomberg Spot Dollar Index dropped 0.2 percent to 1,006.16 at 10:02 a.m. in New York, the lowest since May 9. The Standard & Poor’s 500 Index slipped 0.1 percent, sending the gauge toward a loss of 0.4 percent for the week. The 10-year Treasury yield fell 2 basis points to 2.51 percent, the least since June 2. The yen appreciated 0.3 percent against the dollar and South Korea’s won gained 0.3 percent. The Stoxx Europe 600 Index was little changed.

Treasuries rallied this week, sending the 10-year yield to a three-week low after data showed the U.S. economy shrank more than analysts predicted and consumer spending rose less than estimated. A report today showed consumer confidence increased in June. Core inflation in Japan climbed 3.4 percent last month, the most since 1982, reducing the need for further central bank stimulus.

“The dollar has come under pressure and that’s a function of the yields coming back down,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “It gives a little bit more breathing space to the carry trade.”

The U.S. currency touched its weakest level since 2011 against the New Zealand dollar today and the lowest since August 2008 versus South Korea’s won.

The S&P 500 has lost 0.4 percent this week, paring its gain in June to 1.7 percent. Stocks retreated yesterday as James Bullard, president of the Federal Reserve Bank of St. Louis, suggested that higher interest rates may occur in the first quarter of next year.

‘Timely Warning’

Bullard’s comments are “a timely warning that the time for the Fed to start raising interest rates is drawing nearer,” Stephen Halmarick, head of investment markets research at Colonial First State Global Asset Management, which oversees about $160 billion, said by phone from Sydney. “I don’t think that risk is factored into the market sufficiently.”

The benchmark index has advanced 4.5 percent this quarter, its sixth straight gain for the longest winning streak since 1998. The gauged reached a record on June 20 as reports showed the economy is recovering from extreme weather. Investors shrugged off data this week showing U.S. gross domestic product shrank 2.9 percent in the first quarter, the worst reading since 2009. Consumer Confidence

Fed Chair Janet Yellen last week said accommodative monetary policy, rising property and equity prices and the improving global economy should lead to above-trend growth.

The Thomson Reuters/University of Michigan’s final June index of consumer sentiment rose to 82.5 from 81.9 a month earlier, according to a report released today. The median projection in a Bloomberg survey of 57 economists called for 82 after a preliminary June reading of 81.2.

The S&P 500 trades at 16.6 times the projected earnings of its members, close to its highest valuation in four years.

U.S. stocks are poised for the third-slowest month in six years. About 5.6 billion shares have changed hands each day in June, trailing every month since 2008 except for the previous two Augusts, data compiled by Bloomberg show. The S&P 500 has failed to post a gain or loss exceeding 1 percent for 49 straight days, the longest stretch since 1995.

Russell Revision

Russell Investments concludes the annual revisions to its equity benchmark gauges today. Russell’s U.S. stock indexes, including the Russell 1000 Index and the Russell 2000 Index, are used as benchmarks for $5.2 trillion in assets, according to the company’s website. In the previous two years, the reconstitution day ranked in the top two busiest trading sessions, data compiled by Bloomberg show.

With the end of the quarter, investors should expect about $20 billion in selling of equities and some buying of bonds as pension fund managers rebalance their portfolios, Boris Rjavinski, a strategist at UBS AG, estimated in a June 23 report.

“At quarter-end people are worried about window dressing,” James Liu, global market strategist at JP Morgan Funds said in a phone call. Liu helps oversee $500 billion of assets. “We did have a very good quarter relative to the first, so maybe that means on the margin people are going to be a little more cautious, especially because of the bad economic data that has come out this week.”

DuPont Co. fell 2.7 percent today after the maker of Pioneer genetically-modified corn trimmed its full-year earnings forecast as farmers switched to soybeans. Nike Inc. added 1.7 percent after the largest sporting-goods maker posted fourth- quarter profit that beat analysts’ estimates.

European Stocks

The Stoxx 600 is heading for a weekly retreat of 1.9 percent, the biggest decline since April 11. Mediaset SpA gained 3.8 percent after Exane BNP Paribas upgraded the Italian broadcaster controlled by former Prime Minister Silvio Berlusconi to neutral from a rating similar to sell. Ophir Energy Plc fell 7.5 percent. UBS AG cut the oil explorer to neutral from buy, citing the company’s failure to find reserves in an offshore Gabon field.

Imagination Technologies Group Plc tumbled 5.6 percent. Intel Corp. sold 25 million shares, or a 9.3 percent stake, at 205 pence apiece for a value of 51.25 million pounds ($87.3 million).

Emerging Markets

Emerging-market stocks were little changed as a rally in Indian drugmakers offset declines in Asian technology shares. The MSCI Emerging Markets Index added less than 0.1 percent. Bulgaria’s Sofix Index dropped 2.1 percent as the central bank governor warned of an attack on the nation’s banks.

–With assistance from Emma O’Brien in Wellington, Paul Dobson, Claudia Carpenter, Srinivasan Sivabalan and Lucy Meakin in London, Yoshiaki Nohara in Tokyo and Nick Gentle in Hong Kong.