Stocks Wobble, Bonds at Four-Year High 04/23 16:00
U.S. stocks couldn't hang on to an early gain and finished mostly lower
Monday as technology companies slipped. Bond prices continue to fall and the
yield on the 10-year Treasury note drew closer to 3 percent, a milestone it
hasn't reached since January 2014.
NEW YORK (AP) -- U.S. stocks couldn't hang on to an early gain and finished
mostly lower Monday as technology companies slipped. Bond prices continue to
fall and the yield on the 10-year Treasury note drew closer to 3 percent, a
milestone it hasn't reached since January 2014.
Investors once again focused on corporate deals Monday as utility company
Vectren agreed to be bought by CenterPoint Energy for $6 billion, while the CEO
of Sears called for the company to sell more assets and health care products
company Henry Schein said it will split off its animal health unit. Aluminum
producers tumbled after the Treasury Department moved to ease sanctions against
Russian aluminum company Rusal.
Stocks have faded over the last few days as bond yields continued to climb.
The yield on the 10-year Treasury note continued to trade at four-year highs,
rising to 2.98 percent from 2.96 percent. Bond yields have climbed this year as
investors are starting to see signs that inflation is picking up and the
Federal Reserve continues to raise interest rates. The 10-year yield stood at
2.43 percent at the end of 2017.
Since the global financial crisis in 2008-09, a combination of low inflation
expectations and a bond-buying program by the Federal Reserve have helped keep
bond yields low. That pushed stocks higher by making bonds less appealing by
comparison. With the Fed no longer buying bonds and investors expecting greater
inflation, analysts say higher yields could make bonds more attractive.
Duane McAllister, senior portfolio manager for Baird Advisors, said he
doesn't think rising yields are a problem for the stock market. He said they
are an opportunity for investors to diversify their holdings at a time of
increased market volatility.
"Three percent is an important milestone on the continued trend toward
higher interest rates," he said. "It shouldn't lead anyone, whether you're an
individual investor or an institutional investor, to run for the hills."
The S&P 500 index rose 0.15 points to 2,670.29. It rose as much as 12 points
before midday. The Dow Jones industrial average fell 14.25 points, or 0.1
percent, to 24,448.69. The Nasdaq composite gave up 17.52 points, or 0.2
percent, to 7,128.60. The Russell 2000 index of smaller-company stocks declined
2 points, or 0.1 percent, to 1,562.12.
Earlier this month, a Bank of America Merrill Lynch Global Research survey
of fund managers concluded that if the 10-year yield rises to 3.50 percent,
investors will start buying bonds while selling stocks. And when bond yields
rise, it pushes up interest rates on mortgages and other kinds of loans, making
it more expensive to borrow money. That can slow down economic growth.
Aluminum companies fell sharply after the Treasury Department extended a
deadline for U.S. companies to stop doing business with Rusal. The department
also said it could change its stance on sanctions against the Russian aluminum
company if billionaire businessman Oleg Deripaska gives up control. Earlier
this month the U.S. imposed sanctions that bar citizens from doing business
with numerous Russian businessmen, including Deripaska, as well as several
Russian officials and companies. That followed U.S. frustration with Russian
policy in Syria and Ukraine, as well as alleged election interference.
Alcoa plunged 13.5 percent to $51.90 and Century Aluminum gave up 53 percent
to $16.72. The stocks had rallied after the sanctions were announced.
Walmart fell 1 percent after Bloomberg reported that the retailer might
spend $12 billion to buy the majority of Indian e-commerce company FlipKart.
The CEO of Sears, Eddie Lampert, called for the struggling retailer to sell
the Kenmore brand and its home improvement business. ESL Investments, Lampert's
hedge fund, said it might buy the home improvement assets and is willing to
make an offer for Kenmore as well. Sears has been closing stores, cutting costs
and selling brands as its sales fall. Its stock rose 7.6 percent to $3.24.
Health care products company Henry Schein jumped after it said it will spin
off its animal health business. That division will combine with Vets
FirstChoice as a new publicly traded company, and Henry Schein expects to get
at least $1 billion in cash from the tax-free move. The stock gained 6.8
percent to $73.79.
Benchmark U.S. crude oil reversed an early loss and rose 0.4 percent to
$68.64 a barrel in New York. Brent crude, used to price international oils,
gained 0.9 percent to $74.71 per barrel in London. That helped energy companies
finish higher. Wholesale gasoline rose 1.3 percent to $2.12 a gallon. Heating
oil rose 0.8 percent to $2.14 a gallon. Natural gas stayed at $2.74 per 1,000
Gold and silver prices tumbled. Gold fell 1.1 percent to $1,324 an ounce and
silver fell 3.4 percent to $16.59 an ounce. Copper lost 0.8 percent to $3.11 a
The dollar rose to 108.65 yen from 107.60 yen. The euro fell to $1.2205 from
The CAC 40 in France gained 0.5 percent. Britain's FTSE 100 rose 0.4
percent, and Germany's DAX added 0.3 percent. Tokyo's Nikkei 225 fell 0.3
percent and South Korea's Kospi shed 0.1 percent. Hong Kong's Hang Seng
declined 0.5 percent.