Treasuries fall the most in six-weeks on Europe jitters, US stocks post worst day since June

(Bond Market Wrapup for October 19th, 2012) – Treasuries rose, pushing yields down to the lowest level in six weeks after the two-day EU Summit in Brussels ended without any clarity on aid for Spain, stoking fears the region’s debt crisis will worsen that spiked demand for safe haven assets.

The benchmark 10-year Treasury yield dropped for the first time in five days after German Chancellor Angela Merkel questioned if the end of 2012 deadline to set up a euro-wide banking regulator was realistic, indicating political differences between the region’s leaders.

Sales of previously owned homes dropped 1.7 percent in September from a 7.8 percent rise in the prior month, a report by the National Association of realtors showed. The inventory of new and existing homes combined fell to 2.4 million units, the lowest since July 2002.

The benchmark 10-year yields dropped seven basis points, or 0.07 percentage point, to 1.77 percent while yield on 30-year Treasury bonds also dropped seven basis points to 3.01 percent.

Bond funds rose for the first time this week with the iShares Barclays 20 Year Treasury Bond ETF (TLT) adding $1.63, or 1.36 percent, to end at $121.74 while the Vanguard Total Bond Market ETF (BND) gained 13 cents, or 0.15 percent to finish at $84.68.

US stocks plunged nearly two percent Friday, with major Wall Street indexes logging their biggest single-session drop since June after a slew of weak earnings reports sent investors running for cover.

The Dow Jones Industrial Average (DJIA) fell 205.48 points, or 1.5 percent, to 13,343.51, trimming its weekly gain to 0.1 percent. Led by McDonald’s Corp (MCD), 29 of the Dow’s 30 stocks closed lower. The fast-food chain plunged 4.5 percent after third quarter earnings fell short of expectations.

General Electric (GE) fell 3.42 percent after third quarter revenue came in softer than estimated while Microsoft Corp (MSFT) sank 2.9 percent as earnings missed consensus estimates. Only Home Depot (HD) finished higher.

The S&P 500 Index (SPX) dropped 24.15 points, or 1.7 percent, to 1433.19 with consumer discretionary taking the biggest hit while all the 10 business groups finished lower. The index is up 0.32 percent for the week.

Extending its weekly losses into the second straight week, the NASDAQ Composite Index (COMP) tumbled 67.25 points, or 2.2 percent, to close at 3005.62, after index component Apple Inc (AAPL) shaved 3.6 percent on tech selloff.

For every stock rising, more than three advanced on the NYSE.

Oil prices for November delivery slipped $2.05 to close at $90.05 a barrel.

Gold futures for December delivery fell $20.70 to $1,724.00 an ounce.

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