Treasuries Rise as Spanish Relief Proves Short-lived, Stocks Drop

(Bond Market Recap for July 10th, 2012) 10-year treasuries extended gains for the second straight session this week as demand for US safe haven assets surged amid worries the European sovereign debt crisis is deepening. Yields rose earlier after EU finance ministers agreed late Monday to offer Spain an initial €30 billion by the end of July to prop up its troubled banks.

The yield on 10-year benchmark Treasuries dropped one basis point to 1.50 percent in late afternoon trading, New York time. It had declined to below 1.50 percent for the first time since June 4 after Bank of England Governor Mervyn King said the British economy does not show great prospects of recovery from the recession. Yield on 30-year Treasury Bonds fell two basis points to 2.60 percent.

10 Year Treasury Yield – 1 Month Chart

Bond Funds were also up on the day with the iShares Barclays 20 Year Treasury Bond ETF (TLT) rising 26 cents, or 0.20 percent, to $128.44, while the Vanguard Total Bond Market ETF (BND) gained 8 cents, or 0.09 percent to $84.81 at close.

TLT 1 Month Chart

US stocks closed lower Tuesday for the fourth day in a row as corporate earnings falling short of forecasts due to weak performance by technology companies unnerved investors. Sentiments soured further after a survey of small business optimism came in softer than anticipated.

The Dow Jones Industrial Average (DJIA) shed 83.17 points, or 0.7 percent, to 12,653.12 with Alcoa (AA) leading the decliners after the Aluminum producer said it has suffered losses for the second quarter. Within the Dow, 20 of the 30 components crashed while Kraft Foods (KFT), JP Morgan Chase (JPM) and McDonald’s (MCD) led the day’s percentage gainers.

 Dow Jones Industrial Average 1 Month Chart

The S&P 500 Index (SPX) dropped 10.99 points, or 0.8 percent, to 1341.47, shedding points for the fourth straight session with materials and industrials weighing the most on the 10-business sector index.

Chipmaker Advanced Micro Devices (AMD) led the decliners on the S&P, losing 11 percent on the day after sales for the quarter dropped unexpectedly.  Engine maker Cummins (CMI) plummeted (CMI) sank 8.9 as revenue remained flat in Q2 instead of a 10 percent growth forecast.

The tech-heavy NASDAQ Composite (COMP) added 29.44 points, or 1.0 percent, to close at 2902.33 after equipment maker for chip manufacturers Applied Materials Inc (AMAT) slipped 2.7 percent on revenue and profit downward revision.

For every stock gaining, two retreated on the NYSE.
Oil prices for August delivery shed $2.08 to close at $83.91 a barrel.
Gold futures for August delivery lost $9.30 to settle at $1,579.80 an ounce.

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