Dollar, yields rise, backed by U.S. data; stocks, oil fade

Fri Feb 26, 2016 4:40pm EST
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By Lewis Krauskopf

NEW YORK (Reuters) - The U.S. dollar jumped on Friday and Wall Street's stock rally faded as fresh economic data kept alive Federal Reserve rate increases, while oil prices turned negative late in the session.

The S&P 500 ended slightly lower but finished the week up 1.6 percent. Europe's FTSEurofirst 300 stock index .FTEU3 tallied a 1.6-percent rise on Friday, fueled by strength in mining shares as industrial metals such as copper CMCU3 and aluminum CMAL3 gained.

The dollar rose broadly and the dollar index .DXY, a measure of the greenback's value against six major currencies, gained 0.8 percent to post its best weekly performance since November. Against the Japanese yen, the dollar rose to a more than one-week high.

Treasury yields also rose after data showed U.S. consumer spending rose solidly in January and underlying inflation picked up by the most in four years. A report also showed U.S. gross domestic product growth in the fourth quarter was revised higher, to a 1.0 percent annual rate.

With equity markets off to a weak start in 2016 amid concerns about an economic slowdown, investors have been awaiting the Fed's next policy move after the central bank raised rates in December.

Federal funds futures FFc1 implied traders see a 36-percent chance of the Fed raising rates in June and 53-percent chance in December, both above Thursday's levels, according to CME Group's FedWatch program.

"This information today, while actually good for Main Street, is less than good for a Wall Street that has become addicted to the Fed’s largesse," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

The Dow Jones industrial average .DJI fell 57.32 points, or 0.34 percent, to 16,639.97 and the S&P 500 .SPX lost 3.65 points, or 0.19 percent, to 1,948.05. The Nasdaq Composite .IXIC added 8.27 points, or 0.18 percent, to 4,590.47.   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) February 26, 2016. REUTERS/Brendan McDermid