July 17 (Bloomberg) -- Treasuries rose while stocks fluctuated and the dollar strengthened as investors parsed testimony from Federal Reserve Chairman Ben S. Bernanke for clues to the central bank’s plans for stimulus.
Ten-year Treasury yields dropped five basis points to 2.48 percent, a two-week low, while the Standard & Poor’s 500 Index increased less than 0.2 percent as of 2:53 p.m. New York time after yesterday retreating from a record. The Bloomberg Dollar Index, a gauge against 10 major currency, rose 0.2 percent after earlier reversing a 0.5 percent gain. The yen slid versus all 16 major peers while the pound rallied versus 14. Gold fell 1.2 percent and the S&P GSCI Index of commodities fluctuated.
Treasuries and S&P 500 futures turned higher earlier as Bernanke’s prepared testimony to the House Financial Services Committee said the central bank’s asset purchases "are by no means on a preset course" and could even be expanded if economic conditions warrant. U.S. equities pared gains as Bernanke began responding to lawmakers’ questions. The Bank of England minutes released today showed a unanimous vote to leave bond buying unchanged, and the Bank of Japan refrained from expanding operations to stem volatility in debt markets.
Bernanke’s comments "were a little more dovish than the market was expecting because he did really emphasize the data dependency," said David Chalupnik, head of equities for Nuveen Asset Management who helps oversee 126 billion in Minneapolis, said in a telephone interview. ’’If we don’t see improvement in the economy, that tapering may be pushed out relative to expectations. That would be good for the stock market and it would cause 10-year rates to come in.’’
The U.S. economy maintained a "modest to moderate pace" of growth in recent weeks, bolstered by industries from housing to manufacturing, the Fed said today.
"Residential real estate and construction activity increased at a moderate to strong pace in all reporting districts," the Fed said in its Beige Book business survey, which is based on anecdotal reports from its 12 regional banks. "Manufacturing expanded in most districts since the previous report."
Equities and bonds have been whipsawed in recent weeks amid conflicting signs of whether the Fed will scale back asset purchases. The MSCI All-Country World Index posted the biggest five-day gain since November last week after Bernanke said monetary policy would remain accommodative for the "foreseeable future."