Banks lift stocks, U.S. yields climb after data

Japans Nikkei Edges Higher On Weaker Yen

By Chuck Mikolajczak

NEW YORK (Reuters) – Stocks on major world markets rose further on Wednesday and U.S. Treasury yields rose after a batch of U.S. economic data increased the possibility of an interest rate rise by the Federal Reserve.

U.S. retail sales rose more than expected in January, while other data showed consumer prices recorded their biggest increase in nearly four years last month and manufacturing output steadily rising.

The reports come on the back of comments from U.S. Fed Chair Janet Yellen on Tuesday that the central bank would probably need to raise rates at one of the upcoming meetings.

The economic data and Yellen’s comments heightened expectations of a March interest rate hike, with U.S. short-term interest rates futures implying a 27 percent chance of a 25 basis point rise at its March meeting.

“It makes it more interesting, March, for sure,” said Brian Rehling, co-head of global fixed income strategy for Wells Fargo Investment Institute in St. Louis.

“There is a chance more so than when she started speaking, but just to the extent that she kept it in play rather than saying it is coming in March.”

The prospect of higher rates pushed U.S. financial stocks (.SPSY) 0.5 percent higher on Wall Street for their fifth straight day and lifted the benchmark S&P 500 index (.SPX) slightly higher to another record.

The Dow Jones Industrial Average (.DJI) rose 80.19 points, or 0.39 percent, to 20,584.6, the S&P 500 (.SPX) gained 4.38 points, or 0.19 percent, to 2,341.96 and the Nasdaq Composite (.IXIC) added 15.89 points, or 0.27 percent, to 5,798.46.

MSCI’s benchmark global equity index rose 0.48 percent to 442.26 points <.MIWD00000PUS>, less than a point off its intraday record of 443.75.

Europe’s index of leading 300 stocks (.FTEU3) rose nearly 1 percent earlier to its highest since December 2015, buoyed by bank earnings, but had given up some gains to trade up 0.5 percent.

Benchmark U.S. Treasury yields rose to a two-and-a-half week high of 2.524 percent after the data and were last down 9/32 in price to yield 2.5022 percent.

The U.S. dollar (.DXY) reversed course after touching a one-month high in the wake of the U.S. data and was last down 0.08 percent against a basket of major currencies. The greenback has advanced for eleven straight session before weakening on Wednesday.

Yellen testifies to the U.S. Congress again on Wednesday, this time to the House of Representatives.

U.S. crude (CLc1) was down 0.4 percent at $ 52.99 and Brent shed 0.4 percent to $ 55.73 a barrel

(Reporting by Chuck Mikolajczak; editing by Clive McKeef)