(Bond Market Wrapup for October 10th, 2012) – Treasuries extended gains after European leaders failed to reassure investors the region’s debt crisis would be contained and worries over corporate earnings continued to mount. Moods soured further after a Mortgage Banker’s Association report revealed mortgage applications fell 1.2 percent last week over the previous week. Also the Federal Reserve’s latest Beige Book survey showed economic activity continued to expand at a modest pace across 12 districts in September and early October.
The yield on the benchmark 10-year Treasury notes dropped three basis points, or 0.03 percentage points, to 1.68 percent while 30-year Treasury bond yields dropped four basis points to 2.88 percent.
Bond funds advanced for the day with the iShares Barclays 20 Year Treasury Bond ETF (TLT) adding 86 cents, or 0.71 percent, to $122.81 while the Vanguard Total Bond Market ETF (BND) rose 13 cents, or 0.15 percent to $84.87.
US stocks turned sharply lower Wednesday with the S&P 500 extending losses for the fourth straight session as investors grew worried about global growth after aluminum producer Alcoa cut global demand outlook. The Dow Industrials edged lower as Chevron Corp weighed on the index after the energy major warned of lower warnings.
The Dow Jones Industrial Average (DJIA) slumped 128.56 points, or 1.0 percent, to 13,344.97, extending losses into the third session. Breadth continued to remain negative with 26 of the Dow’s 30 components ending lower. Alcoa (AA) crashed 4.6 percent after the aluminum producer trimmed growth forecasts citing Chinese economic slowdown.
Chevron (CVX) sunk 4.18 percent after the oil company warned earnings would suffer on falling crude prices and weak production. The Supreme Court’s refusal to stop a $19 billion court judgment by an Ecuadorean court for polluting the Amazon also hit the stock hard.
Wal-Mart Stores Inc (WMT) led the day’s blue-chip gainers, rising 1.7 percent after the retailer said it would add US stores following a strong back-to-school season.
The S&P 500 Index (SPX) fell 8.92 points, or 0.6 percent, to 1432.56 with energy faring the worst and financials gaining the most among its 10 business groups.
The NASDAQ Composite (COMP) shed 13.24 points, or 0.4 percent, to close at 3051.78.
Decliners outpaced advancers as breadth was overly negative on the NYSE.
Oil prices for November delivery dropped $1.14 to close at $91.25 a barrel.
Gold futures for December delivery fell 10 cents to $1,765.10 an ounce.