Dollar, crude rise; Wall St lower on housing data

By Rodrigo Campos
A trader works on the floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S. December 28, 2016. REUTERS/Andrew Kelly

By Rodrigo Campos

NEW YORK (Reuters) - The U.S. dollar and crude oil rose on Wednesday, adding to recent trends, while stocks fell in a broad but shallow decline on Wall Street as home resales dropped sharply.

Contracts to buy previously owned U.S. homes fell in November to their lowest level in nearly a year, a sign that rising interest rates could be weighing on the housing market.

Despite the tick down in the 10-year U.S. Treasury yield Wednesday, the spread between the benchmark and 10-year German Bund yields touched its historic high.

On Wall Street, shares fell broadly with real estate posting the largest drop among S&P 500 sectors.

The Dow Jones Industrial Average <.DJI> fell 53.27 points, or 0.27 percent, to 19,891.77, the S&P 500 <.SPX> lost 13.04 points, or 0.57 percent, to 2,255.84 and the Nasdaq Composite <.IXIC> dropped 35.04 points, or 0.64 percent, to 5,452.41.

The pan-European FTSEurofirst 300 index <.FTEU3> edged up 0.27 percent, while MSCI's gauge of stocks across the globe <.MIWD00000PUS> fell 0.32 percent.

Emerging market stocks rose 0.65 percent.

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> rose 0.5 percent while Japan's Nikkei <.N225> closed little changed.

The dollar <.DXY> also rose on continued bets that the Federal Reserve will have to raise rates next year to keep up with inflation and growth brought by a planned fiscal stimulus from the incoming Trump administration.

"This is just a continuation of the trend" of dollar strength, said Axel Merk, president and chief investment officer of Palo Alto, California-based Merk Investments.

"People are trying to be aligned with the winning positions."

The dollar index <.DXY> gained 0.51 percent. The euro fell 0.71 percent to $1.0381 and the pound dropped 0.42 percent to $1.2218.

Euro zone bond yields fell across the board as concerns about the strength of a rescue plan for Italian banks and normal year-end caution pushed investors to the safety of government debt.

Germany's 10-year yields <DE10YT=TWEB> hit their lowest in seven weeks at 0.181 percent. That in turn widened the yield gap to U.S. Treasuries, which act as the world's benchmark borrowing rate. The spread was last at 235.25 basis points.

"It’s come from movement on both sides," said Robert Tipp, chief investment strategist at Prudential.

"Normally, the yields are very highly correlated between the U.S. and Germany, but we’ve actually seen a divergence where Treasury yields have continued to inch higher but Bunds (prices) have rallied and yields have gone in the opposite direction."

The 10-year U.S. Treasury yield hit a session low at 2.541 percent. Benchmark 10-year notes <US10YT=RR> last rose 5/32 in price to yield 2.5468 percent.

Oil prices edged up for a fourth consecutive session, edging close to their highest levels since mid-2015, ahead of U.S. oil inventory figures and as the market awaits evidence of OPEC supply reductions in the new year.

U.S. crude <CLc1> last rose 0.5 percent to $54.17 a barrel and Brent <LCOc1> traded at $56.38, up 0.5 percent on the day.

Oil has surged about 50 percent in 2016 even after plunging in January to its lowest in more than a decade.

(Reporting by Rodrigo Campos, additional reporting by David Gaffen, Dion Rabouin and Sam Forgione; Editing by Nick Zieminski)