U.S. stocks fluctuate as oil falls; dollar gains on Fed outlook

(Bloomberg) — U.S. stocks fluctuated, while oil retreated as investors awaited for further assurance that central banks will continue to support growth and the glut in crude will ease.

Gains by consumer companies offset losses by financial and energy stocks in the Standard & Poor’s 500 Index, as West Texas Intermediate crudedeclined as much as 4.7 percent on Iranian plans to boost oil production. Emerging market equities rose, as shares in Egypt rallied after the country’s central bank devalued its currency. The dollar climbed against 13 of its 16 major peers. Thawing credit markets enabled UBS Group AG to hold the first sale of the riskiest type of bank debt in Europe for two months.

Economic data around the world suggest the global economy is far from the recession environment that wiped almost $9 trillion off the value of equities worldwide this year through mid-February, and central banks are indicating they’ll support asset prices when needed. The Bank of Japan, which adopted a negative interest rate in January, will conclude a policy review on Tuesday and a Federal Reserve meeting ends Wednesday.

“We’ve come so far so fast that at this stage, we’re just treading water after such a big move,” Frank Cappelleri, executive director at Instinet LLC, said by phone. “One area to watch for clues are financials and banks. That becomes even more important with the Fed announcement on Wednesday. They’ve been a major reason why the S&P 500 has been able to extend further than it originally would have.”

Stocks

The S&P 500 slipped 0.1 percent at 12:48 p.m. New York time after falling as much as 0.5 percent. The index jumped to its highest close this year on Friday as investors positively reassessed the European Central Bank stimulus measures.

“The combination of some modest profit taking and then a reaction to the price of oil declining is giving the market not even a hair cut, but just a slight trim,” John Stoltzfus, the New York-based chief market strategist at Oppenheimer & Co., said by phone. “Even though cheap oil is great for most countries and most sectors, we’re still regrettably positively correlated with price of oil.”

The Fed’s two-day meeting this week will be in focus as investors seek indications of the trajectory of interest rates. While traders are pricing in little chance of an increase on March 16, they have boosted the odds for later in the year. The probability of a June move is now about 50 percent, from less than 2 percent a month ago, bolstered by improving economic data, stabilizing oil prices and the comeback in equities.

Starwood Hotels & Resorts Worldwide Inc. jumped more than 7 percent. The company received an unsolicited takeover proposal from a group of investors led by China’s Anbang Insurance Group Co., potentially upending a deal with Marriott International Inc.

The Stoxx Europe 600 Index gained 0.7 percent. European stocks have rebounded 14 percent from last month’s low, with commodity producers and banks leading the gains. After a mixed initial response to the European Central Bank’s latest stimulus measures, the Stoxx 600 erased weekly losses on Friday to post its longest streak of weekly advances in a year.

Bonds

Benchmark Treasuries rose on Monday, with the 10-year yield falling four basis points to 1.95 percent. 

Morgan Stanley forecast the rate will fall to 1.45 percent by the end of September, approaching the record low of 1.38 percent set in 2012, and said the Fed will wait until December before raising interest rates. The U.S. bank also cut its end-2016 projection to 1.75 percent and lowered forecasts for yields on similar-maturity debt issued by Germany, Japan and the U.K., according to a report released on Sunday.

UBS Group was offering so-called additional Tier 1 notes, denominated in dollars. The market has been closed since mid- January amid a rout caused by investor concerns about bank earnings and the possibility that low capital levels would prompt regulators to prevent coupon payments on the bonds.