Stocks Mostly Dip As Bond Yields Rise
(07-05) 09:34 PDT NEW YORK, (AP) —
Stocks slipped in uneven trading Thursday, as jitters over rebounding bond yields dampened Wall Street’s excitement about new buyout activity and strength in the U.S. service sector.
The Institute for Supply Management’s index of service sector activity in June rose to 60.7 from 59.7 in May, indicating that non-manufacturing industries saw slightly faster expansion. The figure was better than expected, fueling sentiment that the economy is recovering from a slow first quarter.
However, the data weighed on bond prices, which were already weak after payroll company Automatic Data Processing and consultancy Macroeconomic Advisers said 150,000 private jobs were created last month Д a good sign that the Labor Department’s June payrolls data Friday will show a solid rise.
As prices fell, the 10-year Treasury note’s yield shot up to 5.14 percent Thursday from 5.04 percent Tuesday. On Monday, the 10-year yield had slipped below the 5 percent level for the first time since early June, when the benchmark yield surged past 5 percent to a five-year peak of about 5.30 percent.
Robust data is a double-edged sword for the stock market; though investors want the economy to strengthen, they remain worried that it will cause rates to rise, which can slow down business.
But the 10-year Treasury yield would have to rise significantly higher to do any real damage to the stock market, said Joe Balestrino, a portfolio manager at Federated Investors Inc. “If things are good, yields are supposed to be a little higher.”
Also hurting the Dow Jones industrial average was General Motors Corp., one of blue-chip index’s 30 components, which was downgraded by a Bear Stearns analyst after the automaker on Tuesday posted a 21.3 percent drop in June sales compared to last year.
In midday trading, the Dow fell 38.05, or 0.28 percent, to 13,539.25.
Broader stock indicators were lower. The Standard & Poor’s 500 index was down 3.23, or 0.21 percent, at 1,521.64, and the Nasdaq composite index fell 1.06, or 0.04 percent, to 2,643.89.
The technology-heavy Nasdaq performed better than the other indexes due in part to Apple Inc., which rose $3.62, or 2.9 percent, to $130.79.
Trading volumes were low Thursday, as they were earlier in the week, with many traders taking time off before and after the 4th of July holiday. Light trading can exacerbate price swings in a nervous market.
Many on Wall Street remained confident about stocks amid takeover news. Hilton Hotels Corp. agreed Tuesday to an all-cash buyout from Blackstone Group in a $20.1 billion deal; chemical company Huntsman Corp. said Wednesday a private equity firm made a cash buyout offer of about $6 billion that trumps last week’s bid from a Dutch company; and a Coca-Cola Co. spokesman said Wednesday the company is looking into buying Cadbury Schweppes PLC’s Snapple iced tea brand or building its own tea brand.
After agreeing to private equity buyouts, Hilton Hotels soared $9.46, or 26 percent, to $45.51, and Huntsman jumped $3.08, or 12.6 percent, to $27.48.
Coca-Cola slipped 26 cents to $52.64, while GM fell $1.41, or 3.7 percent, to $36.57 after the analyst downgrade.
The dollar fell against most major currencies after the Bank of England raised its benchmark rate by 0.25 percent for the fifth time in less than a year to 5.75 percent, and the European Central Bank indicated it might raise rates later in the year.
Gold prices fell.
Light sweet crude futures fell 20 cents to $71.21 a barrel on the New York Mercantile Exchange, after the Energy Department reported crude oil and gasoline inventories increased last week. The data had little discernible effect on stock trading.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 587.1 million shares.
The Russell 2000 index of smaller companies fell 0.14, or 0.02 percent, to 848.11.
Overseas, the often-volatile Shanghai Composite Index plunged 5.3 percent due to worries about government steps to cool down the market and concerns that several new share listings could dampen prices.
Japan’s Nikkei stock average rose despite the drop in China’s stock market, gaining 0.29 percent. Britain’s FTSE 100 fell 0.57 percent, Germany’s DAX index fell 1.09 percent, and France’s CAC-40 fell 0.63 percent.
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