Treasuries Fall on Retail Sales Beat, Stocks Mixed

(Bond Market recap for August 14th, 2012) Treasuries declined as retail sales spiked in July for the first time in four months, beating forecasts, and easing demand for safe-haven assets. Sentiments strengthened further after the German economy posted 0.3 percent growth in Q2, beating analysts’ expectation of 0.2 percent, while French Q2 GDP remained unchanged, beating analysts’ expectation of a 0.1 percent decline.

The yield on benchmark 10-year Treasury notes rose to nearly the highest level since May after consumer purchases, contributing about 70 percent to the economy, picked up last month after a 0.7 percent drop in June. 10-year Treasury yields rose six basis points, 0.6 percentage points, to 1.72 percent. 30-year Treasury bond yield jumped seven basis points to 2.81 percent in late after noon trading, New York time.

10 Year Treasury Yield – 1 Month Chart

The iShares Barclays 20 Year Treasury Bond ETF (TLT) lost $1.70, or 1.35 percent, to settle at $123.79, while the Vanguard Total Bond Market ETF (BND) shed 21 cents, or 0.25 percent to close at $84.48.

TLT 1 Month Chart 

US stocks pared early gains in the final hours of trading Tuesday to close lower after reports in the media suggested Greece was looking to stretch out its austerity program. Reports appearing in the Financial Times suggested Greece is set to seek a 1.5 percent annual deficit reduction target rather than the current 2.5 percent.  The Dow Jones Industrial Average (DJIA) closed 2.71 points, or less than 0.1 percent, higher at 13,172.14, despite losing 27 points in the final trading hour. Breadth within the Dow remained negative with 17 of the 30 components finishing lower, led by Hewlett Packard (HPQ), Alcoa (AA) and Cisco (CSCO).  Home Depot (HD) jumped 3.6 percent after the home-improvement retailed reported 13 percent higher profits in the second quarter and upgraded its earnings outlook for the year.

Dow Jones Industrial Average 1 Month Chart

The S&P 500 Index (SPX) shed 0.18 points to finish flat at 1403.93 with consumer staples and discretionary stocks gaining the most.

The NASDAQ Composite Index (COMP) lost 5.54 points, or 0.2 percent, to end at 3,016.98. Groupon Inc (GRPN) sunk 27 percent after the daily deals site downgraded Q3 forecasts citing the ongoing crisis in Europe.

  • For every stock three stocks declining, about two advanced on the NYSE.
  • Oil prices for September delivery gained 70 cents to finish at $93.43 a barrel.
  • Gold futures for December delivery slipped $10.20 to finish at $1,610.24 an ounce.

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