Treasuries rise on US recovery, Spain worries; US stocks plunge on earnings woes

(Bond Market Wrapup for October 23rd, 2012) – Treasuries surged Tuesday, pushing yields lower after Moody’s downgraded five of Spain’s regions and the country’s central bank said it may not meet budget deficit-reduction targets for 2012, driving record demand from institutional investors including insurance companies and pension funds at the auction of government’s two-year notes.

Yields on the benchmark 10-year notes fell six basis points, or 0.06 percentage point, to 1.76 percent as US earnings data weighed heavily on investors. Yield on 30-year Treasury bonds dropped seven basis points, or 0.07 percentage point, to 2.90 percent, the lowest since Oct 15.

Bond funds surged with the iShares Barclays 20 Year Treasury Bond ETF (TLT) gaining $1.73, or 1.43 percent, to finish at $122.69, while the Vanguard Total Bond Market ETF (BND) rose 19 cents, or 0.22 percent to close at $84.75.

US stocks turned sharply lower Tuesday after a slew of disappointing earnings numbers and lowered outlook from domestic companies deepened worries of a global slowdown.

The Dow Jones Industrial Average (DJIA) closed 243.36 points, or 1.8 percent, lower, at 13,102.53, its biggest single-session drop since June 21. All but two stocks of the blue-chip index’s 30 stocks closed lower with the diversified industrial company Du Pont (DD) pacing the losses. The seeds to chemicals to engineering polymers company reported a 98-percent drop in quarterly earnings, driving the stock lower nine percent.

3M Co (MMM) tumbled 4.11 percent after the manufacturer reported a 6.7 percent gain in third quarter profits but reduced its outlook for the full year citing “economic realities.”

Only Microsoft (MSFT) and Intel (INTC) finished in the positive territory.

The S&P 500 Index (SPX) fell 20.71 points, or 1.4 percent, to 1413.11, breaking through the support-level at 1420 not breached since early Sep. 5 with all the 10 sectors closing lower for the day.

The NASDAQ Composite Index (COMP) tumbled 26.50 points, or 0.9 percent, to close at 2990.46 to mark its first finish below 3,000 since Aug 6.

For every stock rising, nearly three declined on the NYSE.

Oil prices for December delivery slipped $2.49 to close at $86.17 a barrel.

Gold futures for December delivery fell $16.90 to $1,709.40 an ounce.

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