(Bond Market Wrapup for October 9th, 2012) – Treasuries rose the most in three weeks Tuesday after the International Monetary Fund lowered economic forecasts for global growth late Monday to 3.3 percent, down 0.2 percent fromm its earlier forecast in July. Growth for 2013 was also cut to 3.6 percent from its previous forecast of 3.9 percent. Risk sentiments soured further after ECB President Mario Draghi said the 17-member currency-bloc faced risks from financial instability while testifying before the European Parliament. He however, reiterated that the central bank stands ready to purchase sovereign bonds while German chancellor Angela Merkel visited Athens to meet Greek Prime Minister Antonis Samaras who’s seeking a two-year extension to meet austerity targets in order to secure the next round of bailout funding.
The benchmark 10-year Treasury note yield dropped three basis points, or 0.03 percentage point, to 1.71 percent while yield on 30-year Treasury bonds fell three basis points to 2.94 percent in late afternoon trading, New York time.
Bond funds declined Tuesday with the iShares Barclays 20 Year Treasury Bond ETF (TLT) shedding 22 cents, or 0.18 percent, to settle at $121.95, while the Vanguard Total Bond Market ETF (BND) trimmed 15 cents, or 0.18 percent to close at $84.74.
US stocks took a sharp turn lower Tuesday as investors moved to the sidelines before the start of the third quarter earnings season with the NASDAQ and the S&P 500 index extending losses into the third day.
The Dow Jones Industrial Average (DJIA) tumbled 110.12 points, or 0.8 percent, to 13,473.53, marking its second straight down day. The Dow is still only 4.8 percent short of its all-time high, reached five years ago. Breadth within the 30-stock index turned overly negative with losers eclipsing winners 27 to 3. John and Johnson (JNJ) sank 1.5 percent after Goldman Sachs downgraded the stock to sell saying the company need more transformational pipeline opportunities.
Shares of Well Fargo & Co (WFC) tanked 1.8 percent after the US Attorney for the South District of New York sued the bank citing mortgage fraud. Intel (INTC) was the biggest percentage decliner, losing 2.7 percent after Sanford C Bernstein downgraded the chipmaker. Dow component Alcoa Inc (AA) added a penny before the day’s close after the aluminum-maker reported lower than expected losses.
The S&P 500 Index (SPX) dropped 14.40 points, or 1 percent, to close at 1441.48 with all but the energy sector closing lower among its 10 major business groups.
The tech-heavy NASDAQ Composite Index (COMP) lost 47.33 points, or 1.5 percent, to close at 3065.02 after the index’s biggest component Apple Inc (AAPL) slid 0.4 percent for the day. Netflix Inc (NFLX) crashed 11 percent after Bank of America cut the firm’s rating to underperform.
Decliners stayed ahead of advancers 4 to 1 on the NYSE.
Oil futures for November delivery gained $3.06 to close at $92.39 a barrel.
Gold futures for December delivery fell $9.40 to $1765 an ounce.