Stocks End Mixed; Bond Yields Jump
Stocks pulled back modestly Monday in anemic trading, but analysts said it could have been worse considering another jump in Treasury bond yields.
The Dow Jones industrial average lost 31.23 points, or 0.3%, to 9,317.64, while the Nasdaq composite eased 1.01 points, or 0.1%, to 1,764.31.
The Standard & Poor’s 500 index managed to eke out a gain of less than a point, to 993.71.
But falling stocks outnumbered winners 19 to 13 on the New York Stock Exchange and 18 to 13 on Nasdaq.
“Volume is so low here that you don’t want to read too much into it,” said Peter Dunay, market strategist at Wall Street Access, a New York-based brokerage firm.
Activity is expected to be light all week, with many market players on summer vacation until after Labor Day.
Key indexes advanced last week to their highest levels in more than a year. Many analysts say the market’s ability to hold up this summer, despite a surge in bond yields, reflects investors’ faith in a continuing economic recovery that would boost corporate earnings.
Bonds continued their losing ways Monday. A strong report on July home sales provided more evidence that the economy wasn’t fading, analysts said.
The two-year Treasury note yield jumped to 1.96%, up from 1.92% on Friday and the highest since December.
The 10-year T-note ended at 4.53%, up from 4.47% on Friday.
“It’s hard to escape what looks like upward pressure on interest rates,” John Poole, who manages $12 billion in fixed-income assets at Mellon Private Asset Management in Boston, told Bloomberg News. “Rates are still well below what is considered normal” given the outlook for economic growth.
“I wouldn’t be surprised to see 4.75%” on 10-year T-notes by the end of September, said Ralph Axel, a U.S. government bond strategist at HSBC Securities Inc. in New York.
Optimism about the economy continues to bolster the dollar. The euro fell to $1.087 on Monday from $1.089 on Friday.
Among Monday’s highlights:
* Some industrial names that have been hot recently pulled back. Caterpillar dropped $2.03 to $69.66 after brokerage Legg Mason lowered its rating to “hold” from “buy.”
Alcoa fell 34 cents to $27.79 after Prudential Securities downgraded it to “hold” from “buy.”
* Wal-Mart advanced 70 cents to $59.10 after raising its August same-store sales estimate. The retailer now sees sales at stores open at least one year rising this month between 4% and 6% compared with last August.
Among other retailers, J.C. Penney rose 47 cents to $20.35 and Ross Stores added 53 cents to $47.93, but Home Depot lost 32 cents to $32.48.
* Intel lost 15 cents to $27.24 after gaining $1 on Friday, when it forecast sharply higher third-quarter revenue.
Other chip stocks also were mostly lower. Broadcom fell 63 cents to $25.17 and National Semiconductor lost $1.02 to $27.11. But Advanced Micro Devices gained 18 cents to $10.09.
* Mortgage giants Freddie Mac and Fannie Mae rallied. The stocks have been hammered in recent months on concerns about their accounting.
Freddie Mac gained $2.19 to $51.66 and Fannie Mae jumped $2.95 to $63.35.
* Apollo Group, which operates the University of Phoenix, slid $1.48 to $62.33. A Barron’s magazine article questioned the company’s growth potential.
* Krispy Kreme Doughnuts, which has gained 29% this year, was hit by profit taking. The shares dropped $2.57 to $43.60.
* Drug stocks attracted buyers after recent declines. Eli Lilly rose 78 cents to $63.58 and Pfizer was up 32 cents to $29.87.
* European markets were mostly lower. The German market slid 1.4% and the French market lost 1.1%. The Japanese market also lost ground. The Nikkei-225 index eased 4.53 points to 10,276.64.
