Stock Prices Decline as Bond Yields Jump
Stocks lost ground Wednesday as Treasury bond yields rose and as a home-sales report and some quarterly earnings reports triggered growth concerns on Wall Street.
The market was unable to close higher even though crude oil prices fell for a third day.
The Dow Jones industrial average eased 2.48 points, or 0.02%, to 10,709.74 after holding in positive territory for most of the day.
The broader Standard & Poor’s 500 index lost 2.18 points, or 0.2%, to 1,264.68, and the technology-heavy Nasdaq composite was off 4.60 points, or 0.2%, to 2,260.65.
The Russell 2,000 small-stock index eased 0.2% from Tuesday’s all-time high.
Losers topped winners by modest margins on the New York Stock Exchange and on Nasdaq.
In economic news, the National Assn. of Realtors said existing home sales dropped 5.7% in December, raising worries about a sustained slowdown in the housing sector.
“This data confirm the scenario in which we see slowing [economic] growth due to weaker housing,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
Others, however, said a pullback in housing had been widely anticipated on Wall Street.
A jump in Treasury bond yields rattled some investors. The government’s sale of $22 billion in new two-year T-notes drew the weakest demand since April. The notes were sold at a yield of 4.43%.
For every $1 of notes sold at the auction there were $2.11 worth of bids, the lowest since April and down from $2.42 at the last two-year note sale in December.
Indirect bidders, the class of investors that includes foreign central banks, bought 25.6% of the securities, down from 30.6% last month.
The 10-year T-note yield, a benchmark for mortgage rates, jumped to a one-month high of 4.48% from 4.39% on Tuesday.
Traders said the bond market already had been on edge, with the Federal Reserve expected to raise its benchmark short-term rate on Tuesday from 4.25% to 4.50%. The big question is whether the Fed hints again that it is nearly done tightening monetary policy or signals the need for further hikes.
Moreover, next week also brings a major transition as Ben S. Bernanke takes the helm at the Fed from Chairman Alan Greenspan.
The day’s good news for the stock market was another slide in crude oil futures, which sank $1.21 a barrel to $65.85 in New York trading after an Energy Department report showed that U.S. inventories of gasoline and distillate fuel increased for a fourth straight week.
Oil had reached $68.35 a barrel on Friday, the highest since Sept. 1, on worries about potential supply interruptions from Nigeria and Iran.
In other market highlights Wednesday:
* A gauge of homebuilding stocks dropped 2.4%, paring its 12-month rise to 15%. Centex slid $2.51 to $70.78, Lennar was off $1.49 to $61.45 and D.R. Horton, the country’s No. 1 builder, fell 78 cents to $37.20.
Calabasas-based Ryland dropped $4.82 to $70.35 after saying it expected profit this year of $10.09 a share, less than the $10.12 a share average estimate of analysts surveyed by Thomson Financial.
The home sales report also helped to knock retailer Home Depot down 47 cents to $39.98.
* Blue chips were mixed on earnings news. 3M slid $1.20 to $73, Xerox lost 15 cents to $14.31 and Texas Instruments fell 80 cents to $29.89.
But Colgate-Palmolive highlighted the list of companies with encouraging profit reports. The consumer products maker rose $1.90 to $55.65 after saying fourth-quarter operating profit per share jumped 17% on higher sales in the U.S. and Latin America.
* Abbott Laboratories jumped $2.11, to $42.17 after saying sales of its Humira treatment for rheumatoid arthritis may exceed $1.9 billion this year, up from $1.4 billion in 2005. Drug maker Bristol Myers Squibb rose 64 cents to $21.97 after its quarterly profit beat Wall Street expectations by 3 cents a share.
* McDonald’s fell 69 cents to $35.16, retreating from a multi-year high reached Tuesday. Investor Bill Ackman, who had been pressing management for changes, said he no longer would push the chain to sell 20% of company-owned restaurants in an initial public offering and supports McDonald’s plans to license 1,500 restaurants to operators who pay royalties.
* Energy stocks weighed on the market as crude prices dropped. Valero Energy slid $1.93 to $58.37, Baker Hughes lost $2.10 to $72.96 and Kerr McGee sank $3.39 to $101.63.
But many other commodity-related shares continued their recent rally. Inco jumped $2.52 to $48.08 and Rio Tinto soared $5.35 to $211.34. Both are mining firms. Olympic Steel rallied $1.23 to $29.26.
* Disney fell 55 cents to $25.44 one day after agreeing to acquire Pixar Animation Studios for $7.4 billion in stock. The deal will make Steve Jobs, Pixar’s chief executive, the single largest shareholder of Disney and give him a seat on the board. Pixar rose 45 cents to $58.02.
