Treasuries end week higher amid economic woes, US stocks slide

(Bond Market Wrapup for September 28th, 2012) – US Treasuries finished higher for the second straight week as Europe struggled to reach a consensus over containing the region’s debt crisis.  At the same time some of the US economic indicators weakened, helping sustain demand for safe havens.

However, Treasury securities declined Friday after a stress test showed Spanish banks’ combined capital shortfall  amounted to EUR 59.3 billion ($76.3 billion), lower than some traders had predicted, boosting risk appetite. The amount is within the European Financial Stability Mechanism’s tolerance since Madrid has already been committed EUR 100 billion for bank recapitalization.

The benchmark 10-year Treasury yield fell two basis points, or 0.02 percentage point, to 1.63 percent while yield on 30-year Treasury bond slipped two basis point to 2.82 percent in late afternoon New York trade.

Bond funds gained slightly with the iShares Barclays 20 Year Treasury Bond ETF (TLT) added 7 pence, or 0.06 percent, to settle at $124.22 while the Vanguard Total Bond Market ETF (BND) gained 8 cents, or 0.09 percent to close at $85.15.

US stocks capped the worst week since June on Friday as an unexpected contraction in consumer confidence and manufacturing in the Midwest spooked investors on the last trading day in an otherwise blockbuster quarter.

The Dow Jones Industrial Average (DJIA) slipped 48.84 points, or 0.4 percent, to 13,437.13, still up 2.7 percent for September and 4.3 percent for the quarter. Breadth within the 30-stock blue-chip index turned negative with decliners outpacing gainers 25 to 5. Bank of America (BAC), UnitedHealth (UNH) and Intel (INT) were among the day’s biggest decliners. McDonald’s (MCD) lost 1.63 percent after Janney Montgomery lowered its outlook for the fast-food chain.

The S&P 500 Index (SPX) fell 6.48 points, or 0.5 percent, to 1440.67 with technology and telecommunications lagging the most and utilities the lone sector gaining among its 10 business groups. Up 5.8 percent for the quarter, the S&P has added nearly 15 percent year to date.

The NASDAQ Composite (COMP) tumbled 20.37 points, or 0.7 percent, to end the week at 3116.23, up 6.2 percent for the quarter and almost 20 percent for the year.

Accenture (ACN) jumped 7.11 percent after the consulting giant upgraded its annual earnings outlook. Research in Motion (RIM) surged five percent after the firm reported lower than expected losses.

For every two stocks rising, three retreated on the NYSE.

Oil futures for November delivery rose 34 cents to $92.91 a barrel.

Gold futures for December delivery slid $6.60 to $1773.90 an ounce.

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