Bond yields move up again
Bond yields resumed their ascent Monday and share prices ended little changed on the first day of trading after a turbulent week for stocks and interest rates.
The yield on the Treasury’s 10-year note rose to 5.15% on Monday from 5.11% late Friday. Last week, investors took signs of recalcitrant inflation to mean that a rate cut by the Federal Reserve this year was unlikely, sending bond yields soaring and stock prices tumbling. The 10-year Treasury yield climbed above 5% for the first time since last summer.
The Fed has kept its key short-term interest rate unchanged at 5.25% since last summer after a string of increases over about two years.
“There’s a fair amount of nervousness still prevalent in the equity market as a result of yields moving through 5%,” said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.
The Dow Jones industrial average edged up 0.57 of a point Monday to 13,424.96, capping a session that saw stocks slip, advance and then pull back again. The Dow rose 157 points Friday but still finished the week down 1.8%.
The Standard & Poor’s 500 index Monday rose 1.45 points, or 0.1%, to 1,509.12, and the Nasdaq composite index fell 1.39 points, or 0.1%, to 2,572.15.
The Russell 2,000 index of smaller-company stocks slumped 2.13 points, or 0.3%, to 833.18.
Advancing issues just barely outnumbered decliners on the New York Stock Exchange.
Oil prices, which also stirred inflation concerns last week but fell sharply Friday, rebounded Monday after Iran’s oil minister said the Organization of the Petroleum Exporting Countries didn’t plan to speed up its release of oil into the market before September.
Crude futures rose $1.21 to $65.97 a barrel on the New York Mercantile Exchange.
The dollar climbed against most other major currencies, and gold prices also rose.
In other market highlights:
* Home-builder stocks fell on the prospect of a further rise in interest rates. Hovnanian Enterprises set a 52-week low of $20.95 before closing down 63 cents, or 2.9%, at $21.17. Toll Bros. fell 56 cents to $27.59.
* Real estate investment trusts slipped after Stifel Nicolaus downgraded 21 REITs because of interest rate concerns. Boston Properties fell $2.49, or 2.2%, to $108.77. SL Green Realty fell $2.75, or 2%, to $134.73.
* Steel maker Nucor fell $3.95, or 5.9%, to $62.66 after warning that second-quarter profit would fall because customers had increased orders in the first quarter before an expected price rise. U.S. Steel also slid, dropping $8.85, or 7%, to $116.20 after Germany’s ThyssenKrupp denied it was in talks to acquire the company. ThyssenKrupp shares rose 2.8% in German trading.
* Valencia-based pharmaceuticals company MannKind soared $1.83, or 16%, to $13.60 after favorable comments by Legg Mason fund manager Bill Miller.
* Drug maker Medivation rocketed $3.62, or 22%, to $19.80 after the San Francisco-based firm said its Alzheimer’s drug Dimebon showed good results.
* U.S. shares of Teva Pharmaceutical Industries jumped 80 cents, or 2.1%, to $39.68 after a U.S. court refused to prohibit the Israeli drug maker from selling a generic version of Novartis’ Lotrel blood-pressure treatment.
* Apple fell $4.30, or 3.5%, to $120.19 after Chief Executive Steve Jobs said the company wouldn’t give developers a kit to let them write specialized programs for the iPhone. Instead, he said, they will be able to write Web-based programs that iPhone users can access via an Apple browser.
* Netflix shares sank $1.50, or 6.4%, to $21.93 after a JPMorgan analyst downgraded the Web-based DVD rental firm, saying the company faced increased competition from Blockbuster and had little hope of being acquired by Amazon.
* Qwest Communications International shares tumbled 81 cents, or 8%, to $9.36 after CEO Richard Notebaert said he would retire as soon as he found a successor. Notebaert joined Qwest five years ago, rescuing the phone company from bankruptcy after debt swelled to $26 billion.
* H&R; Block jumped $1.06, or 4.7%, to $23.58 after UBS encouraged investors to buy the stock, saying the company might receive a takeover bid following the sale of its mortgage unit.
* UST surged $2.87, or 5.6%, to $54.35 after UBS raised its rating on the stock and said the company would benefit from more competition in the tobacco market.
* Bearingpoint fell 17 cents, or 2.2%, to $7.43, after a Jefferies analyst lowered his rating on the management and technology consulting company, citing increased competition and lower demand in the sector.
* China’s main stock index surged 2.1%, marking its fifth consecutive advance after tumbling 8.3% on June 4.
* Elsewhere overseas, key indexes rose 0.3% in Japan, 1% in Britain, 1.5% in Germany and 1% in France.
