Short-term Treasury yields fade as Fed offsets positive data, stocks extend losses

(Bond Market Wrapup for October 24th, 2012) – Treasury prices erased losses Wednesday after the US Fed ended its policy-setting meeting without any major changes to its bond-buying program or interest rate forecast and said the economy is still growing modestly and unemployment remains elevated.

On the economic data front, a report from the Commerce department showed new-home sales rose 5.7 percent to a seasonally adjusted annual rate of 389,000 in September. Also a preliminary HSBC Markit China Manufacturing Purchasing Managers Index rose to 49.1 in October from 47.9 in September, indicating the economy has found a bottom, adding to the “soft landing” theory.

Yield on the benchmark 10-year Treasury note rose one-basis point, or 0.01 percentage point, to 1.77 percent while 30-year Treasury bond yields rose five basis points to 2.95 percent in late afternoon trade, New York time.

Bond funds moved lower with the iShares Barclays 20 Year Treasury Bond ETF (TLT) shedding $1.21, or 0.99 percent, to $121.48 while the Vanguard Total Bond Market ETF (BND) fell 5 cents, or 0.06 percent, to $84.70.

US stocks extended losses Wednesday after early gains as the Federal Reserve’s call for moderate growth offset signs of improvement in American housing market and Chinese factory output and a handful of positive earnings result.

After rising 52 points in intraday trade, the Dow Jones Industrial Average (DJIA) ended 25.19 points, or 0.2 percent, lower at 13,077.34. Breadth within the blue-chip index turned positive with winners outpacing laggards 22 to 8.

Erasing early gains, Boeing (BA) shares closed 0.15 percent lower after the airplane maker and defense contractor raised its full-year outlook and beat third-quarter earnings estimate as commercial airplane and defense business heated up.

The S&P 500 Index (SPX) fell 4.36 points, or 0.3 percent, to 1408.75 with utilities declining the most and healthcare pacing the gains among its 10 business sectors.

The tech-laden NASDAQ Composite Index (COMP) dropped 8.76 points, or 0.3 percent, to close at 2981.70 after Netflix crashed 12 percent after the world’s biggest online video service lowered its outlook for domestic growth. Facebook vaulted 19 percent after the world’s biggest social networking site reported sales that topped street expectations.

Advancers pulled ahead of decliners 1.3 to 1 on the NYSE.

Oil prices for December delivery eased 94 cents to close at $85.73 a barrel.

Gold futures for December delivery fell $7.80 to $1,701.60 an ounce.

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