* Wall Street ends mostly higher after volatile session
* 10-year Treasuries yields rise above 2.50 percent
* Dollar continues gains against euro, yen
* Crude drops, gold bounces back
By Leah Schnurr
NEW YORK, June 21 U.S. equities stabilized in
choppy trading on Friday, while Treasury yields were on track
for their biggest weekly jump in a decade as investors
reassessed their positions in the wake of the Federal Reserve's
plans to withdraw its economic stimulus.
Markets are adjusting to the Fed's plan laid out earlier in
the week for the central bank to scale back its asset purchases
later this year if the U.S. economy keeps improving as expected.
Chairman Ben Bernanke roiled world markets when he outlined
the timeline for the plan on Wednesday, with interest rates
rising and equities markets selling off.
Easing fears about an immediate banking crisis in China
helped make for a calmer tone, but short-term funding rates
there remain elevated, especially for smaller lenders.
After a choppy session, U.S. stocks ended higher following a
two-day selloff. Ten-year Treasuries yields rose above 2.50
percent, their highest intraday level since August 2011.
For the week, the 10-year yield was on track to rise 40
basis points for the biggest single-week jump since the March
2003, according to Reuters data. The dollar rose and was headed
for its biggest weekly gain since July 2012.
"It's all one big unwind. That's been a negative for
Treasuries as hedges are unwound," said Sean Murphy, a
Treasuries trader at Societe Generale in New York.
Major U.S. stock indexes racked up their worst week since
April. The benchmark S&P 500 remained below its 50-day moving
average, after breaking below it on Thursday.
"A lot of investors thought the sell-off was overdone after
we broke through those technical levels, but all the existential
things that drove us down are still in place," said Nicholas
Colas, chief market strategist at the ConvergEx Group in New
"People aren't sure what's going to happen with Fed policy
or rates or anything else. It is too soon to say we hit a
MSCI's broad world stock index, which tracks
shares in 45 countries, was off 0.3 percent, and Europe's broad
FTSE Eurofirst 300 index ended down 1 percent.
The Dow Jones industrial average added 41.08 points,
or 0.28 percent, to 14,799.40. The Standard & Poor's 500 Index
rose 4.24 points, or 0.27 percent, to 1,592.43. The
Nasdaq Composite Index was off 7.39 points, or 0.22
percent, to 3,357.25.
The Fed is currently buying $85 billion a month in bonds,
part of its huge stimulus effort that has driven many investors
to embrace riskier assets and has sent U.S. stocks up about 15
percent for the year. Investors now face the task of unwinding
those trades, which is expected to continue to roil global
markets across asset classes.
The recovery in stocks in the afternoon coincided with a
Wall Street Journal article suggesting markets were "misreading"
Benchmark 10-year Treasury notes were down more
than a point in price to yield 2.54 percent, while 30-year bonds
dropped 1-9/32 in price to yield 3.59 percent.
The dollar continued to climb as Bernanke's view that the
U.S. economy is improving prompted traders to start pricing in a
rise in interest rates in late 2014.
"Players will likely park (assets) in the dollar until we
have got a little more clarity about where the world is going,"
said Neil Jones, head of hedge fund FX sales at Mizuho Corporate
Bank in London. "The dollar is benefiting from that and I sense
it will continue to do so."
The dollar rose 0.5 percent against a basket of currencies
, putting it on track for a weekly gain of 2 percent, the
biggest since early July, 2012. Trading volume was slowing with
under an hour to go in the New York session which ends the
The euro fell 0.7 percent to $1.3126 and the dollar
gained 0.4 percent against the yen to 97.70 yen.
There was little respite across the emerging markets, with
MSCI's benchmark index down 0.8 percent.
As the Fed's policy tapering gradually pushes U.S. Treasury
yields higher, the attractiveness of returns in developing
countries like Turkey and South Africa has waned.
The emerging markets index has fallen close to 5.5 percent
this week, making for a year-to-date loss of more than 14
percent, and many in the market see further falls ahead.
Gold drew some demand from investors attracted by the week's
big equity and bond price falls, although worries about China's
sluggish growth outlook weighed on sentiment.
Spot gold recovered from a three-year trough and was up 1.2
percent at $1,293.65 an ounce, while gold futures
added 0.6 percent to $1,293.40 an ounce.
Worries about demand from China and the U.S. weighed on oil.
Brent crude lost $1.24 to $100.91, while U.S. oil
dropped $1.45 to $93.69.