Stocks, dollar, yields up as monetary policy in focus

By Sinead Carew

NEW YORK (Reuters) - Wall Street hit new records on strong earnings and the dollar extended a winning streak on Wednesday, boosted by rising Treasury yields as investors focused on monetary policy.

U.S. Treasury yields hit years-long highs and the difference in yield between U.S. 5-year and 30-year Treasuries fell to the lowest since November 2007 as expectations for tighter global monetary policy pushed investors to sell shorter-dated Treasuries.

"The general tone from Fed speakers this week has been more on the hawkish side," said Subadra Rajappa, head of U.S. rates strategy at Societe Generale. "That and the global removal of accommodation is something markets have noticed."

 

Rajappa said U.S. yields were rising in concert with European government bonds on expectations the European Central Bank, could signal a rollback of monetary stimulus on Thursday.

On Wall Street, the S&P 500 was boosted by strong earnings from heavyweight International Business Machines, which helped the Dow Jones Industrial Average open above 23,000 for the first time.

"We're in a sweet spot where the economy is growing not too strong and not too weak, the Fed's tightening but not too rapidly, and earnings continue to expand. All the news is positive," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

The Dow Jones Industrial Average rose 121.94 points, or 0.53 percent, to 23,119.38, the S&P 500 gained 1.2 points, or 0.05 percent, to 2,560.56 and the Nasdaq Composite added 0.06 points, or 0 percent, to 6,623.72.

Meanwhile, benchmark 10-year notes last fell 13/32 in price to yield 2.3447 percent, from 2.298 percent late on Tuesday.

The 30-year bond last fell 32/32 in price to yield 2.8531 percent, from 2.803 percent late on Tuesday.

The dollar rose for a fifth straight day, boosted by soaring Treasury yields.

The dollar index rose 0.09 percent, with the euro up 0.05 percent to $1.1772.

"It's all about the yields this week, so far," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. [L8N1MT3Q4]

In Europe, stocks edged up with a raft of company results in focus. The pan-European FTSEurofirst 300 index rose 0.22 percent and MSCI's gauge of stocks across the globe gained 0.11 percent.[.EU]

In commodity markets, Brent oil prices retreated from three-week highs reached earlier in the day on Wednesday and U.S. crude declined, after a surprising fall-off in U.S. refining runs boosted inventories of gasoline and diesel.

U.S. crude fell 0.25 percent to $51.75 per barrel and Brent was last at $57.85, down 0.05 percent on the day.

Gold fell for a third straight session on pressure from a firmer dollar amid speculation that the next chair of the U.S. Federal Reserve could be a policy hawk. Spot gold dropped 0.3 percent to $1,280.53 an ounce.

(Additonal reporting by Dion Rabouin, Saqib Iqbal Ahmed and Stephanie Kelly in New York, Danilo Masoni in Milan, Wayne Cole in Sydney; Editing by Richard Balmforth and Nick Zieminski)