Treasuries rise for the third week on asset shift; US stocks end election week lower

(Bond Market Wrapup for November 9th, 2012) – Snapping a two-day losing streak since President Obama’s reelection, the benchmark 10-year Treasury yield rose from a two-month low, pushing prices lower after a report showed consumer confidence reached a five-year high in November. However, bond prices finished higher for the third week in a row.

On Friday President Obama spoke about raising taxes on America’s wealthiest individuals and reiterated his resolve to veto any bill that extends Bush-era tax-cuts for the top 2 percent wage earners. He also invited democratic and Republican leaders to the White House next week to begin negotiations on the so-called fiscal cliff, $607 billion in automatic tax hikes and spending cuts scheduled to take effect in January. The Congressional Budget Office warned Thursday the fiscal cliff could shrink real GDP by 0.5 percent next year, pushing unemployment rate past the nine percent mark in 2013.

Yield on the benchmark 10-year Treasury notes was little changed at 1.61 percent on the day. The yield has however, dropped 10 basis points for the week. 30-year Treasury bond yield edged down one basis point to 2.75 percent, the lowest in about two months.

Bond funds had a mixed day with the iShares Barclays 20 Year Treasury Bond ETF (TLT) gaining 14 cents, or 0.11 percent, to $125.98, while the Vanguard Total Bond Market ETF (BND) lost 8 cents, or 0.09 percent, to close at $84.90.

A strong read on American consumer confidence pushed US stocks modestly higher Friday but major equity averages still finished the week down more than two percent.

Stock indexes recovered from early losses after preliminary data from the University of Michigan and Thomson Reuters came in significantly better than expected in November at 84.9, a level not seen July 2007 and topping forecasts of 82.

After witnessing sell-offs on Wednesday and Thursday as investors’ attention quickly shifted from the election to the looming fiscal cliff, the Dow Jones Industrial Average (DJIA) edged up 4.07 points, or 0.06 percent, to 12,815.39 on Friday, down 2.1 percent for the week. This was the blue-chip index’s third straight week of losses and its worst performance in more than five months.

Dow’s leading gainers included Boeing (BA) and Caterpillar (CAT), rising 3.2 percent and 1.5 percent, respectively.

Walt Disney (DIS) tumbled six percent after the media giant’s third quarter revenue fell short of consensus estimates.

The S&P 500 Index (SPX) rose 2.34 points, or 0.2 percent, to 1379.85, still off 2.4 percent for the week. Technology paced the gains on Friday while utilities fared the worst among its 10 industry groups.

The tech-heavy NASDAQ Composite Index (COMP) added 9.29 points, or 0.3 percent, to close at 2904.87, still down 2.6 percent for the week and logging its fifth straight week of losses.

Breadths were evenly matched on the NYSE.

Oil prices for December delivery gained 98 cents to $86.07 a barrel.

Gold futures for December delivery rose $4.90 to $1,739.90 an ounce.

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