Last update: 06-Dec-2013 1:00 am
Friday, December 06, 2013
Trinidad & Tobago Guardian Online
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US stocks drop for a fourth straight day
NEW YORK—US stocks dropped for a fourth day in a row yesterday as investors continued to express worry about the recent rise in bond yields. Banking stocks also dragged down the broader market. The Dow Jones industrial average dropped 70.73 points, or 0.47 per cent, to 15,010.74. The Standard & Poor’s 500 index lost 9.78 points, or 0.6 per cent, to 1,646.05. The market fell broadly; 4 stocks fell for every one that rose on the New York Stock Exchange. The technology-heavy Nasdaq composite index also fell, losing 13.69 points, or 0.48 per cent, to 3,589.09. The Russell 2000 index, which is made up of primarily riskier, small-company stocks, fell nearly twice as much as the S&P 500.
That index fell 11.05 points, or 1 per cent, to 1,013.25. Investors had little data to digest Monday, so the focus for many remained the ongoing climb in bond yields. The yield on the benchmark 10-year Treasury note rose to 2.88 per cent from 2.83 per cent Friday. Yields are at their highest level since July 2011. The ten-year yield has been rising sharply from a recent low of 1.63 per cent reached in early May as the economy has improved and as investors anticipate an end to the Federal Reserve’s huge bond-buying programme as early as next month. The programme has been keeping interest rates low to encourage borrowing and hiring. “We’ve been in this artificially low interest rate environment for so long, it’s hard to figure out what ‘normal’ is,” said Jim Dunigan, chief investment officer with PNC Wealth Management.
The quick rise in bond yields has worried some investors because it leads to higher interest rates on many kinds of loans, including home mortgages and corporate loans. “I do think we’re not too far away from that point in time where this heavy increase in bond yields is going to start impacting the (stock) markets,” said Doug Peebles, chief investment officer of AllianceBernstein Fixed Income. Homebuilders were hit hard yesterday as traders worried that higher mortgage rates could upset a recovery in the housing market. Lennar, PulteGroup and DR Horton all fell roughly 4 per cent.
Some investors expect the ten-year note could rise above the psychologically important 3 per cent mark as early as month’s end. Monday’s losses come after the Dow posted its worst week of 2013. The benchmark index fell 2.2 per cent last week and the S&P 500 lost 2.1 per cent. The Dow and the S&P 500 have not had a four-day losing streak since December 2012.
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