Stocks slip again, but bond yields surge to highest levels since May

An entrance to a Wall Street subway station in New York.

By Associated Press

Oct. 27, 2016 2:50 PM PT

U.S. stocks slipped for the third consecutive day Thursday as media and defense companies skidded. Bond yields climbed to their highest levels since May, which helped banks and hurt stocks that pay big dividends.

Stocks started the day higher and were flat at midday, then gradually slid through the afternoon. Cable and TV companies and publishers sank, and industrial companies such as Raytheon and L-3 Communications fell after reporting weak results.

Bond prices fell, and yields climbed. That helped banks, since they can earn more from lending as interest rates rise. It also sent down high-dividend stocks such as utilities and real estate companies as bonds become more appealing to investors seeking income.

Scott Kimball, co-portfolio manager of the BMO TCH Core Plus Bond Fund, said investors believe that central banks will cut back on bond buying. In recent days, that has sent prices lower and yields higher.

“The largest bond buyers, the biggest bond managers in the market, have been these central banks,” Kimball said. He added that yields could rise more if economic growth picks up.

The Dow Jones industrial average fell 29.65 points, or 0.2%, to 18,169.68. The Standard & Poor’s 500 index slid 6.39 points, or 0.3%, to 2,133.04. The Nasdaq composite sank 34.29 points, or 0.7%, to 5,215.97.

Comcast continued to fall as investors worried about competition it could face from a new online TV service like AT&T’s DirectTV Now, which was announced Tuesday. Comcast fell 1.7% to $61.48 on Thursday after falling 3% on Wednesday.

Competitor Charter Communications and TV networks such as CBS and Twenty-First Century Fox also skidded.

Automaker and auto parts retailers also fell, which contributed to the losses for consumer companies.

Raytheon slid 3.5% to $136.28 as its outlook failed to impress investors. Communications and surveillance company L-3 Communications dropped 7.4% to $137.75 after it posted weak sales. Aerospace giant Boeing slipped 1.5% to $143.31 after a big surge Wednesday.

U.S. government bond prices dropped. The yield on the 10-year Treasury note jumped to 1.85% from 1.79% a day earlier, its highest yield in almost five months.

Bristol-Myers Squibb broke out of a slump, climbing 5.4% to $51.96 after it raised its annual forecasts. The stock has fallen by about one-third since early August as investors worried about sales of its cancer treatment Opdivo. Celgene jumped 6.4% to $104.75 after it raised its forecasts as sales of its cancer drug Revlimid kept rising.

Smartphone chipmaker Qualcomm said it will buy NXP Semiconductors for $38 billion, or $110 per share in cash. Qualcomm jumped 2.8% to $70.09, and NXP rose 0.4% to $99.08. The deal has been rumored for about a month, and investors were excited about the prospect. Qualcomm has climbed 10%, and NXP is up 20% since it was first reported that the companies were in talks.

Level 3 Communications surged 9.7% to $31 and CenturyLink soared 10.5% to $51.87 after the Wall Street Journal said the two phone companies are in talks to combine. AT&T, Verizon and Frontier Communications also rose.

Newspaper publishers Gannett and Tronc, which owns the Los Angeles Times, both slumped on reports that they may not be able to combine. Bloomberg reported Thursday that banks financing the deal were not willing to help fund it. The report cited anonymous sources and said the companies were still talking. USA Today publisher Gannett dropped 17.1% to $8.21, and Tronc dived 27.8% to $12.27 in heavy trading.

Earnings continued to pour in after the closing bell. Amazon fell 4% in aftermarket trading after its profit fell short of analysts’ estimates, and Alphabet, the corporate parent of Google, rose 1% after it surpassed expectations.

Oil prices recovered after falling for three days in a row. U.S. benchmark crude rose 54 cents, or 1.1%, to $49.72 a barrel. Brent crude, the international standard, rose 49 cents, or 1%, to $50.47 a barrel.

ZTO Express, an express delivery company in China, went public in the largest IPO of the year. The company’s offering of 72.1 million U.S. shares raised $1.4 billion. The offering priced at $19.50, and shares sank 15% to $16.57.

The dollar rose to 105.30 yen from 104.54 yen. The euro slipped to $1.0896 from $1.0906.

Wholesale gasoline remained at $1.49 a gallon. Heating oil rose 2 cents to $1.57 a gallon. Natural gas rose 3 cents to $2.76 per 1,000 cubic feet.

Gold rose $2.90 to $1,269.50 an ounce. Silver rose 1 cent to $17.64 an ounce. Copper rose 2 cents to $2.16 a pound.

Germany’s DAX index picked up 0.1%, and the FTSE 100 in Britain rose 0.4%. The French CAC 40 was little changed. Japan’s benchmark Nikkei 225 index slid 0.3%, South Korea’s Kospi rose 0.5% and Hong Kong’s Hang Seng lost 0.8%.

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UPDATES:

2:50 p.m.: This article was updated with closing prices, analysis and additional market details.

This article was originally published at 6:50 a.m.