NEW YORK (Reuters) - The U.S. dollar rose on Tuesday, while stocks and Treasuries prices fell after comments from a top Federal Reserve official brought forward market expectations of an interest rate increase.
Oil prices edged higher despite the stronger greenback, bouncing back from Monday’s rout.
The dollar rose sharply against the euro after Federal Reserve Bank of Atlanta President Dennis Lockhart, a member of the Fed’s policy setting committee who typically votes with the core, told the Wall Street Journal it would take a sharp turn for the worst in economic data to change his view in support of a rate hike after the mid-September meeting.
Markets have been preparing for a rate hike, which would be the first in nearly a decade. Friday’s U.S. payrolls numbers are key as traders try to time the Fed’s next move. The U.S. economy is expected to have created 223,000 jobs in July, on par with job creation in June, according to economists polled by Reuters.
“All the world’s central banks have pumped unprecedented amounts of liquidity; if [it] has not created an inflationary event, a pullback may create the opposite,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
“You run the risk of triggering a deflationary event and that’s what markets are fearing.”
On Wall Street, utilities stocks, sharply sensitive to Treasury yields, were the worst performers among the 10 S&P 500 industry groups. Apple’s stock (AAPL.O), down in 10 of the last 11 sessions, weighed heavily on major Wall Street indexes.
At the close on Wall Street, the Dow Jones industrial average .DJI was down 47.51 points, or 0.27 percent, to 17,550.69, the S&P 500 .SPX lost 4.72 points, or 0.22 percent, to 2,093.32 and the Nasdaq Composite .IXIC dropped 9.84 points, or 0.19 percent, to 5,105.55.
A measure of stocks in major markets globally .MIWD00000PUS fell 0.1 percent. Nikkei futures NKc1 were little changed.
The euro fell against the U.S. dollar for the fifth session in the last six to hit a two-week low after Lockhart's comments. The currency EUR= lost 0.6 percent at $1.0885.
“(Lockhart) is seen as a swing vote and he has become increasingly hawkish,” said Ian Gordon, G10 currency strategist at Bank of America Merrill Lynch in New York.
U.S. crude rose and copper edged up despite the stronger greenback, but the outlook for commodities continued to be clouded by worries about a slowdown in China, the world’s second-largest economy. Oil is also weighed down by oversupply concerns.
Brent LCOc1 added 1.2 percent to $50.12 a barrel and U.S. crude CLc1 gained 1.6 percent to $45.89 a barrel.
“A retest of Brent crude’s 2015 low around $45 per barrel looks inevitable given current ample market supply and intensifying bearish market sentiment toward prices,” BMI Research said in a note.
The Thomson Reuters/CoreCommodity CRB index .TRJCRB rose 0.8 percent after hitting a more-than-12-year low on Monday.
Benchmark 10-year Treasury notes US10YT=RR were last down 20/32 in price to yield 2.223 percent, from a yield of 2.152 percent late on Monday. U.S. 30-year bonds US30YT=RR were last down 24/32 in price to yield 2.898 percent, from a yield of 2.861 percent late on Monday.
Additional reporting by Richard Leong, Barani Krishnan and Sam Forgione; Editing by Chris Reese and Dan Grebler