MY: US yields jump, stocks gain on growth prospects
World stocks firmed and US. Treasuries prices slumped on Tuesday after the US Federal Reserve reaffirmed its commitment to purchase USD 600 bn in bonds to boost the economy, following the positive track set by stronger-than-expected US consumer spending numbers.
The dollar edged higher against the euro and the yen after the Fed -- the US central bank -- modestly upgraded its evaluation of the US economic expansion.
"The economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment," the Fed said in a statement at the conclusion of a one-day meeting.
World stocks neared a two-year high set last month, and benchmark US Treasury 10-year yields hit their highest levels in more than six months on signs of accelerating economic growth. Data released on Tuesday showed US retail sales rising for a fifth straight month and the producer price index beating expectations.
However Wall Street stocks faded late in the trading day.
"I'm slightly disappointed that the (Fed) doesn't see the world in the same light that investors do," said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Connecticut.
"The Fed continues to say that the outlook for employment and spending isn't as strong as the market perceives it."
Investors are also eyeing another potential boost to the economy in the form of a deal worked out between US President Barack Obama and Republican lawmakers to extend tax cuts, jobless benefits and a payroll tax credit.
Shares of Best Buy Inc, the consumer electronics bellwether, tumbled 16%, weighing on the market. Best Buy, the leading US. electronics retailer, reported a drop in quarterly profit and sales and cut its full-year outlook, citing weak demand in its key US market.
The Dow Jones industrial average was up 29.82 points, or 0.26%, at 11,458.38. The Standard & Poor's 500 Index was down 1.42 points, or 0.11%, at 1,239.04. The Nasdaq Composite Index was down 2.17 points, or 0.08 percent, at 2,622.74.
US Treasuries extended losses after the Fed statement, adding to a sharp sell-off as the tax deal sparked concern over faster growth and a widening federal budget gap. US Treasury 10-year yields , which influence consumer and corporate borrowing costs, rose to 3.48% from 3.28% late Monday.
Global optimism
European shares pared losses after the early U.S. data, which affirmed a stocks rally that has pushed up the S&P 500 index by 6% since November 29. European stocks gained for the seventh straight session on thin volume, with the FTSEurofirst 300 Index up 0.3%.
The MSCI world equity index edged up 0.1% and the Thomson Reuters global stock index rose 0.4%, nudging the MSCI index closer to a two-year high set in November. Emerging stocks added 0.6 percent.
Currencies fluctuated throughout the day as the dollar temporarily slipped, bouncing back after Fed's announcement. The dollar gained 0.16% against a basket of major trading partner currencies.
The euro declined 0.09% to USD 1.3377. The dollar rose 0.4% to 83.73 yen .
US crude oil futures also slid after the Fed's announcement, settling down 33 cents, or 0.37%, at USD 88. 28% on the New York Mercantile Exchange. Gold rose USD 5.55, or 0.4%, to USD 1,398.70 an ounce.
