U.S. Stocks Turn Positive; Treasury Sells $16 Billion 30-year Bonds

Bikram Pandey
12 May, 2011
New York City

U.S. indexes turned positive after dropping 0.6% as Fed Chairman Bernanke urged lawmakers not to link raising debt ceiling with budget cuts. Mixed set of latest economic data did not provide clear signal to health of the U.S. economy. U.S. Treasury completed the sale of $16 billion of 30-year bonds.

[R]4:00 PM New York – U.S. indexes turned positive after falling nearly 0.5% as Fed Chairman Bernanke urged lawmakers not to link raising debt ceiling with budget cuts. Mixed set of latest economic data did not provide clear signal to health of the U.S. economy. U.S. Treasury completed the sale of $16 billion of 30-year bonds yielding 4.38%.[/R]

U.S. stocks declined after commodities extended losses for the second day in a row but stocks reversed in the late afternoon after the Fed Chairman Ben S. Bernanke cautioned lawmakers not to link the debt ceiling increase with budget cuts.

In his testimony to the U.S. Senate Banking Committee in Washington he added failure to raise the debt limit would “at minimum” lead to an increase in interest rates and that could harm all borrowers and in extreme case could destabilize the economy.

However, the latest batch of economic data did not provide clear picture. Wholesale prices increased more than expected and jobless claims declined but retail sales were weaker than anticipated. In the overseas markets manufacturing eased in the euro-zone and China reported lower industrial production on power shortages. India, China and Australia struggled with higher inflation.

U.S. weekly jobless claims declined 44,000 and producer price index increased 0.8%. Retail sales in April increased 0.5%. Cisco reported lower third quarter earnings and guided cautious fourth quarter.

U.S. Treasury completed the sale of $16 billion of 30-year bonds yielding 4.38%. The auction received 2.43 times bids the offered bonds and foreign central banks took 33% of the bonds, lower than 40% average in auctions since October.

In Canada, BCE first quarter net earnings declined 29% to $503 million.

In earnings news, Cisco third quarter net income declined 18% to $1.8 billion and the stocks dropped 5% after the company no longer backed its long term annual revenues forecast between12% and 18% and guided cautious fourth quarter.

Kohl’s fourth quarter net income grew 5% to $211 million. Precision Castparts fourth quarter net income rose to $271.0 million.

European market indexes edge lower as commodities fall and resource linked stock led the decliners. Industrial production in the euro-zone fell 0.2% in March but surged from a year ago, but market focused on the falling commodities prices. Insurers traded lower after Aegon NV and Allianz SE reported a sharp plunge in profits.

UK stocks traded lower after commodities accelerated the decline for the second day in a row. Crude oil fell 2.5% and silver plunged 7% in London trading.

For the month, crude oil is down 15% and silver has fallen 32%. In London trading, miners closed lower and Lloyd’s insurer, Amlin reported sales increase of 14% and fast growing apparel retailer Supergroup quarterly sales growth declined to 61%.

Stocks in Japan dropped sharply led by resources and commodities linked stocks. Hitachi Ltd said fourth quarter net quadrupled on cost cuts and higher sales of construction equipment and chips. Inpex, Mitsui, Mitsubishi and JX Holdings led the decliners.

Stocks in Mumbai dropped sharply tracking losses in international markets despite a sharp fall in oil price. The benchmark index declined 1.4%. Industrial production index in March surged 7.3% but wholesale price index hovered near the recent high. The dip in crude oil price lifted airlines.

Australian stocks dropped 1.8% after crude oil prices plunged more than 5% in New York trading. Resource and energy complex stocks led the decliners. Optus estimated slower earnings and revenues growth in the current fiscal year. Bluescope Steel estimated full year loss.

Commodities, Bonds and Currencies

The 10-year bond yield increased to 3.23% and 30-year bond rose to 4.35%.

The U.S. dollar decreased to $1.423 to a euro and fell against the Japanese yen to 80.87 yen.

Immediate delivery futures of Texas crude oil increased $0.55 to $98.76 a barrel, of natural gas increased 0.01 cents to $4.19 per mbtu and gasoline prices decreased 6.20 cents to 306.08 cents a gallon.

In metals trading, copper prices increased 6.60 cents to $3.98 per pound, gold increased $0.80 to $1,502.20 per ounce and silver decreased $0.81 to $34.70.