Dow loses 410 points in three days after bond yields cross the psychological 5% barrier
Rate fears coupled with rising oil and higher bond yield rattled the US market today (Thursday, 7 June 2007) and it closed lower for the third consecutive day. Yield on 10-yr note soared above psychological 5% level for the first time since August. Oil almost kissed the $67/bbl level.
Global growth and rising interest rates in Asia and Europe have put the U.S. bond market under pressure, lifting yields to levels last seen nearly a year ago. Today’s upbeat economic data put further pressure on bonds.
All the 30 Dow stocks closed lower for the day. The Dow Jones Industrial Average closed lower by a huge 198.94 points at 13266.73. With today’s loss, Dow has almost lost 411 points in the past 3 days.
Nasdaq and S&P too suffered substantial double digit losses. Nasdaq closed lower by 45.8 points at 2541.38 and S&P 500 closed lower by 26.66 points at 1490.72.
IBM came to the closest for being a Dow winner. Major Dow laggards were Alcoa, Exxon Mobil, 3M and Wal-Mart.
May same store sales data mixed
When market opened in the morning, stocks open lower across the board again. All the 10 sectors were trading in the red. But Technology tried to inch up Dow in the green for a very brief period of time.
The tech sector's best performers were Google and Apple.. The latter was up 2.1% after UBS raised its price target. But the recovery was quite short lived.
May same-store sales were mixed at best. Wal-Mart Stores reported a 1.1% increase in same-store sales (excluding gasoline sales), below the consensus estimate of a 1.4% increase. The retail giant forecast that sales at stores open at least one year would be between flat and 2% for June. Target reported a 5.8% increase in same-store sales, in line with its 5%-to-7% growth forecast. Costco Wholesale has already reported a better-than-expected 7% increase in same-store sales for May.
Losses accelerated in the last half-hour of trading after PIMCO chief investment officer Bill Gross said global growth will likely keep bond prices under pressure, lifting yields further, over the next three to five years.
Crude surpasses $67 during intraday trading
Wal-Mart today lost almost 2% after it posted a modest gain in May same-store sales, narrowly missing Wall Street estimates, amid weakness in its apparel and home merchandise.
Crude oil futures rose today to the highest level in almost a month after fresh concerns about slowdown in refinery activity last week. Reports on delay in oil tanker loadings in Oman also boosted up crude prices. Crude-oil futures for light sweet crude for July delivery closed at $66.93/barrel (higher by $0.97/barrel or 1.47%) on the New York Mercantile Exchange. Prices crossed $67/bbl during intraday trading. Prices are 5.5% lower than a year ago.
Trading volumes showed 1.907 billion shares exchanging hands on the New York Stock Exchange and 2.388 billion on the Nasdaq stock market. Declining issues topped gainers by 15 to 1 on the NYSE and by 23 to 6 on the Nasdaq.
With little catalyst to bank upon tomorrow, investors will have the April trade report in terms of economic data to set the tone of trading. It is expected to hit the wires at 8:30 ET, and will be watched for overall trends in the trade balance.