Treasury note yields back off
Wall Street eked out small gains Tuesday, as investors found solace in declining Treasury yields but also concerns about a drop in new-home construction and a lackluster profit forecast from Best Buy.
The 10-year Treasury note’s yield, which hit five-year highs last week, fell to 5.08% from 5.14% late Monday, alleviating some worries about high rates slowing down corporate takeovers and hurting the already sluggish housing market.
Also lifting the stock market was a rise in General Electric’s stock, after its unit GE Energy Financial Services bought a stake in Regency Energy Partners, a natural gas processor and distributor, from HM Capital Partners for $603 million.
The major stock indexes wavered throughout the day. Concerns about the economy came to the forefront after electronics chain Best Buy lowered its fiscal 2008 profit forecast and Commerce Department data showed construction of new homes and apartments fell 2.1% last month. The drop, which was expected, followed small increases in April and March.
Economic reports have at turns upended and supported the market in recent weeks as investors have tried to feel their way while juggling concerns about inflation, interest rates, the housing sector and the overall economy.
The Dow Jones industrial average rose 22.44 points Tuesday, or 0.2%, to 13,635.42. The blue-chip index was buoyed largely by General Electric, which rose $1.22, or 3.2%, to $39.29.
Broader stock indicators also edged higher. The Standard & Poor’s 500 index rose 2.65, or 0.2%, to 1,533.70, and the Nasdaq composite index edged up 0.2 to 2,626.76.
The Russell 2,000 index of smaller-company stocks rose 2.06 points, or 0.2%, to 848.34.
Advancing issues outnumbered decliners by about 5 to 3 on the New York Stock Exchange.
Bond yields fell on the new-home data. While Wall Street has largely tried to view weakness in the housing market as old news, any sign that the fallout isn’t contained and could taint other areas of the economy could alarm investors.
The dollar, which had strengthened in recent weeks as bond yields advanced, was lower against other major currencies. Gold prices rose.
Analysts said the stock market’s small back-and-forth moves Tuesday were to be expected after its big advance last week, when relief over inflation and interest rates sent stocks soaring and gave the Dow its biggest three-day point gain since November 2004.
“We’re taking a very normal time-out to refresh. One of the best ways to gauge a market is to see how it reacts when you have profit taking. It shows that the mettle of the market is still quite positive, that there is still money on the sideline that wants in,” said Al Goldman, chief market strategist at A.G. Edwards.
Going forward, the stock market will be focusing more on individual company news and pre-announcements before July’s second-quarter profit reports.
“It looks like investors have lowered their expectations for second-quarter earnings growth,” said Alan Gayle, senior investment strategist for Trusco Capital Management. “Companies will have a fairly low bar to step over when they start reporting next month.”
Best Buy reported that its fiscal first-quarter earnings fell 18% amid weak profit in China and increased sales of lower-margin products such as notebook computers. The stock fell $2.83, or 5.9%, to $45.18.
In other corporate highlights:
* Airline stocks rallied after an analyst upgrade of US Airways Group and an announcement from United Airlines that it was hiring pilots for the first time since 2001.
US Airways rose $1.85, or 6.8%, to $29.14. UAL, the parent company of United, rose $2.60, or 7.4%, to $37.93.
Other airlines followed, with Continental Airlines rising 90 cents, or 2.7%, to $33.80, and AMR climbing 73 cents, or 2.9%, to $26.29.
* Overseas, key stock indexes rose 0.1% in Japan and fell 0.8% in Britain, 0.3% in France and less than 0.1% in Germany.
* DirecTV Group jumped $1.42, or 6.1%, to $24.54. A Morgan Stanley analyst upgraded the stock, saying the potential loss of a distribution partnership had been priced into the satellite television service provider’s shares.
* Yahoo fell 49 cents to $27.63. Goldman Sachs analyst Anthony Noto said the company was less likely to be sold now that Jerry Yang had succeeded Terry Semel as chief executive.
* Bristol-Myers Squibb rose $1.27, or 4.2%, to $31.58. The drug maker won accelerated U.S. review for an experimental breast-cancer medicine intended for patients whose tumors have spread to other organs.
