Treasury yields fall to erase Fed-fuelled jump, US stocks stuck on growth worries

(Bond Market Wrapup for September 20th, 2012) – Treasuries advanced for the fourth straight session Thursday, pushing yields down that erased gains following the Federal Reserve’s announcement last week.

Yield on 10-year Treasuries slipped one basis point, or 0.01 percentage point, to settle at 1.77 percent after falling as low as 1.72 percent. Manufacturing in China continue to worry as a HSBC report showed contraction for the 11th straight month. A regional purchasing manager’s index slumped to a 39 month low in Europe against an estimated uptick. In the US, first-time jobless claims fell marginally to 382,000 last week. A Philadelphia Federal Reserve Bank report showed manufacturing in the region improved slightly with its business-conditions index rising to negative 1.9 from negative 7.1 in August. Yield on 30-year Treasury bonds declined 1 basis point, or 0.01 percentage point, to 2.96 percent in late afternoon trading, New York time.

Bond funds continued to rise with the iShares Barclays 20 Year Treasury Bond ETF (TLT) gaining 30 cents, or 0.25 percent, to settle at $121.41, while the Vanguard Total Bond Market ETF (BND) added 2 cents, or 0.02 percent to close at $84.63.

Most US stocks closed lower Thursday while blue-chip stocks managed to eke out slight gains after economic reports from China to Japan and Europe fuelled worries that the global economic recovery is stuck in the rut.

The Dow Jones Industrial Average (DJIA) added 18.97 points, or 0.1 percent, to 13,596.93, with Kraft Foods (KFT) and Microsoft (MSFT) pacing the gains. Breadth within the blue-chip index remained slightly positive with gainers edging out losers 17 to 13.

Alcoa (AA) and Caterpillar (CAT) were the among biggest percentage decliners. Bank of America (BAC) slumped 1.1 percent following reports that the bank may cut 16,000 jobs by 2012 end to trim down costs.

The S&P 500 Index (SPX) lost 0.79 points, or 0.05 percent, to 1461.23 with industrials sinking the most and consumer staples outperforming among its 10 business groups.

The NASDAQ Composite (COMP) shed 6.67 points, or 0.2 percent, to close at 3175.96.

For every stock rising, nearly two advanced on the NYSE.

Oil prices for October delivery fell 11 cents to close at $92.87 a barrel.

Gold futures for December delivery dropped $1.50 to $1,770.20 an ounce.

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