Treasuries rise the most since May on cliff worries; Dow plunges the most in a year

 

(Bond Market Wrapup for November 10th, 2012) – The benchmark 10-year Treasury note advanced the most in five months as the so-called fiscal cliff of tax increases and spending cuts loomed and President Barack Obama’s re-election bolstered bets the US Fed will keep supporting the economy.

Violent protests in Greece as the country’s parliament got ready to vote on further spending cuts and tax hikes added to the already dour mood. The European debt crisis hit the headlines again after ECB President Mario Draghi warned the region’s debt problems are starting to take a toll on Germany, which remained relatively insulated so far. Separately, a European Commission report in Brussels said the euro-zone economy will expand by only 0.1 percent in 2013, well below a previous May projection of one percent.

Treasury 10-year yields slid 10 basis points, or 0.1 percentage point, to 1.65 percent while yield on 30-year bonds also declined 10 basis points to finish at 2.82 percent in late afternoon trade, New York time.

Bond funds surged with the iShares Barclays 20 Year Treasury Bond ETF (TLT) jumping $2.21, or 1.81 percent, to close at $124.00, while the Vanguard Total Bond Market ETF (BND) gained 20 cents, or 0.24 percent to finish at $84.85.

US stocks plunged Wednesday with the Dow Jones logging its biggest decline in a year following a sell-off on Wall Street as investors’ focus turned to the fiscal cliff and Europe’s debt crisis after President Barack Obama won re-election Tuesday night.

The Dow Jones Industrial Average (DJIA) plunged 312.95 points, or 2.4 percent, to close at 12,932.73, posting its biggest daily decline since November 2011. Led by JP Morgan (JPM) and Bank of America (BAC), banks were the biggest drag on the blue-chip index. Breadth turned overly negative with all the 30 components of Dow closing lower.

The S&P 500 Index (SPX) tumbled 33.86 points, or 2.4 percent, to 1394.53, dropping below the psychologically important 1,400 level and posting its biggest decline since early June. All the 10 industry groups closed lower with financials leading the decline. Peabody Energy Corp (BTU) tanked nearly 10 percent while Alpha Natural Resources (ANR) slipped more than 12 percent on bets Obama’s re-election will mean more regulation for the coal industry.

The tech-heavy NASDAQ Composite (COMP) plunged 74.64 points, or 2.5 percent, to close at 2937.29. For-profit education stocks, which have faced tougher regulations under the Obama administration, got battered with Corinthian College (COCO) and Apollo Group (APOL) both tanking more than six percent.

For every stock rising, five declined on the NYSE.

Oil prices for December delivery fell $4.27 to close at $84.44 a barrel.

Gold futures for December delivery fell $1 to $1,714 an ounce.

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