Star-Bulletin news services
Stocks decline despite
upbeat spending news
NEW YORK >> A selloff in the bond market spilled over to Wall Street yesterday, with investors cashing in profits after five days of blue chip gains. Investors looked past two better-than-expected economic reports, including a jump in retail sales.
"The biggest thing, the largest issue at hand is that Treasury prices took a substantial hit and made people nervous. That put a spook in the equity markets," said Arthur Hogan, chief market analyst at Jefferies & Co.
The downturn in the bond and stock markets followed Tuesday's decision by the Federal Reserve to leave interest rates untouched and at 45-year lows.
Investors sold bonds on the belief that interest rates will rise as the economy improves; stocks, meanwhile, fell on concerns that rising yields would make bonds more attractive than equities.
However, analysts didn't agree on the degree to which the bond downturn affected stocks yesterday. Others said stocks fell due mostly to profit taking following recent gains and due to extremely light trading volume.
"Nobody is around. ... It is hard to get deals done," said Michael Murphy, head equities trader at Wachovia Securities.
The Dow Jones industrial average closed down 38.30, or 0.4 percent, to 9,271.76. The retreat followed a five-day gain of 273.74.
The broader market also ended lower. The Standard & Poor's 500 index declined 6.32, or 0.6 percent, to 984.03, after its own five-day winning streak. The Nasdaq composite index, up in the past two sessions, slipped 0.42, or 0.02 percent, to 1,686.59.
Declining issues outnumbered advancers 4 to 3 on the New York Stock Exchange. Trading volume was extremely light at 1.20 billion shares, just ahead of Tuesday's 1.13 billion.
The Russell 2000 index rose 0.50, or 0.1 percent, to 467.45. The NYSE composite index fell 25.28 to5,569.62. The American Stock Exchange composite index slipped 2.45 to 962.44.
The price of the Treasury's benchmark 10-year note was down 1 point, while its yield rose to 4.57 percent from 4.44 percent late Tuesday. Prices and yields move in opposite directions.
The decline in the stock market was in keeping with the pullback analysts expected to occur this month. With investors having already factored in better-than-anticipated second-quarter earnings and an economic turnaround, analysts say stocks are at premium levels and are prone to retreat a bit.
Volume has also been a factor, with the number of shares changing hands being very thin as many traders and investors are on summer vacation. Put simply, it takes very little to push the market lower these days.
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