Treasury Note's Yield Jumps 5%

Elena
07 Jun, 2007
New York City

U.S. stock market opened lower on Thursday, reflecting rising yields in the bond market and mixed retail sales reports. The 10-year Treasury note''s yield jumped over 5% in overnight trading, raising concerns that a rate cut later in the year is less probable. Mixed retail sales in May indicated that consumer spending was uncertain. Wal-Mart Stores, Target Corp., J.C. Penney posted lower-than-expected same-store sales.

[R]9:45AM U.S. stocks opened in the negative on rate concerns.[/R]

U.S. stock market opened lower on Thursday, reflecting rising yields in the bond market and mixed retail sales reports. The 10-year Treasury note's yield jumped over 5% in overnight trading, raising concerns that a rate cut later in the year is less probable. Mixed retail sales in May indicated that consumer spending was uncertain.

Retailers released reports on sale-store sales in May, showing a slight improvement compared to April’s generally weak sales. Wal-Mart ((WMT)) lost 0.9% after it said its same-store sales came in slightly below estimates because of weakness in its apparel and home merchandise. J.C. Penney ((JCP)) was a notable decliner, falling 4%, Macy's ((M)) slipped 2%, and Abercrombie & Fitch ((ANF)) lost 0.6% after reporting sales below estimate.

Costco Wholesale ((COST)), Limited Brands ((LTD)), and Jos. A. Bank Clothiers ((JOBS)) moved higher on better-than-expected same-store sales. However, Nordstrom ((JWN)) dropped 1.7% despite robust results. Saks Inc. ((SKS)) jumped 5.1% after the luxury retailer posted stronger-than-expected sales.

In deal news, a group of investors including Blackstone Group launched an improved offer for Biomet ((BMET)), lifting it to $11.4 billion, or $46 a share. In morning trading, the Dow Jones industrial average fell 12.92, or 0.10%to 13,452.75 a day after falling nearly 130 points. The Standard & Poor's 500 index fell 3.76, or 0.25%, to 1,513.62, and the Nasdaq composite index fell 4.51, or 0.17%, to 2,582.67.

Bonds fell sharply, with the yield on the benchmark 10-year Treasury note jumping to 5.04% from 4.97% late Wednesday.


[R]8:30AM Wal-Mart same-store sales in May disappointed.[/R]

Wal-Mart Stores Inc. ((WMT)) said Thursday its May same-store sales rose 1.1%, excluding fuel. Including fuel, same-store sales advanced 1.3%, slightly below analyst expectations of an increase by 1.4%. Total U.S. sales for the four-week period rose 7.7% to $28.26 billion. The company expects June same-store sales to come between flat and 2%.

J.C. Penney Company Inc. ((JCP)) reported 2% decline in its May same-store sales, missing the forecast for a rise of 0.3%. The retailer said total department store sales increased 0.3% to $1.2 billion. The company expects June same-store sales to fall in the low single-digit percentage range.

Costco Wholesale Corp., (COST)), warehouse retailer, reported 7% increase in same-store sales, exceeding expectations of a rise by 5.6%. Total sales in May rose 11% to $5.14 billion.

Limited Brands Inc. (LTD)) said its May sales at stores open at least one year rose 2%. Analysts, on average, had expected its same-store sales to fall 1.6%, according to Thomson Financial. Net sales for the four weeks ended June 2 rose to $774.7 million from $719.4 million


[R]8:00AM NY-7:00PM Mumbai Sensex loses 70 points on a sell-off in auto stocks.[/R]

The Sensex on BSE settled 69.75 points lower, or 0.49%, at 14,186.18.

The market-breadth was negative as there were almost three decliners for every two advancers. As 1,456 stocks declined, 1,043 stocks advanced and only 75 stocks were unchanged. Of the 30 stocks in the Sensex, only six advanced, while all the others declined. The turnover on BSE was Rs 4,269 crore, much lower than Rs 5,290 crore on Wednesday. On NSE, the turnover was Rs 9,093 crore, also lower than Rs 10,225 crore on Wednesday.

Economic news

The Secretary of the Department of Telecommunications, Mr. D S Mathur, said at a conference today that by the end of the current financial year there will be 30% more rural areas connected by mobile telecom service.

Mahindra Forgings Ltd is about to merge its three subsidiaries with the company in an effort to become the second-largest forgery in India. Mahindra Forgings would incorporate Mahindra Stokes Holding Company Ltd, Mahindra Forgings Overseas Ltd and Mahindra Forgings Mauritius Ltd into itself. The combined turnover of all the companies is assessed to be in the region of Rs 2,000 crore.

Trading highlights

Reliance Communications was the most-active stock with a turnover of Rs 212 crore followed by Nitin Fire and Reliance Industries.

Advancers

IT stocks outshone all other sectors today as four of the six advancers in the Sensex stocks were IT companies. Satyam Computers led the advances, up 3.4% to Rs 481. TCS gained 0.6% to Rs 1,206, Infosys Technologies advanced 0.8% to Rs 1,955 and Wipro rose 2.5% to Rs 545. Aluminium and copper large-cap Hindalco Industries gained almost 3% to Rs 153. Reliance Comms added 0.8% to Rs 520.

Decliners

Auto stocks were hit the hardest today. Bajaj Auto was the leading decliner, down 2.8% to Rs 2,155. Hero Honda lost 2.3% to Rs 697. Bike sales have slowed down recently which has impacted production plans. Other major auto stocks also ended in negative territory. Maruti slipped over 2% to Rs 761 and Tata Motors shed 1.4% to Rs 677.

Other decliners included cigarette company ITC down 2% to Rs 155 and Hindustan Lever also 2% lower to Rs 191. State Bank of India declined 2% to Rs 1,360 and Oil & Natural Gas Corporation lost 0.7% to Rs 858.

Larsen & Toubro lost 1.2% to Rs 1,987 despite securing a contract in United Arab Emirates from ENOC Processing Company, Dubai, for the building of new process plants in a naphtha hydro-treated reformer project. Index heavy Reliance Industries lost 1.34% to Rs 1,664.80.


[R]7:00AM European stocks trade mixed with London up, and Germany, France down.[/R]

European markets were mixed on Thursday. By late morning in London, the FTSE 100 gained 0.4% to 6,547.9, while in Germany, Frankfurt Xetra Dax slipped 0.1% to 7,721.99 and the CAC 40 in Paris lost 0.3% to 5,957.89. National benchmarks fell in 10 of the 16 western European markets that were open.

Advancers

ASML, maker of chip manufacturing equipment, rose 2% after Sanford C. Bernstein upgraded the chip sector to overweight, on the gounds of the industry having reached the bottom of its trading cycle and on the premise that growth would improve in the third quarter. Infineon, the German chipmaker, was upgraded from underperform to market perform. The stock gained 0.6%.

MAN, whose target price was raised, gained 0.6%. DaimlerChrysler, the German carmaker, rose 1.4% after Morgan Stanley raised its target price on the stock. The broker added the company truckmaking division, which accounts for 55% of the share price, had not benefitted from the re-rating of the truck industry.

Decliners

Retail stocks remained weak on concerns that further interest rate increases in the eurozone could foster a consumer slowdown. Swedish fashion retailer H&M fell 2.3% while Spanish rival Inditex lost 1.5%.

Swedish Volvo shed 2.5% after JPMorgan downgraded the stock from neutral to underweight on its lower exposure in eastern Europe. SKF fell 1.9%. Morgan Stanley reiterated his underweight recommendation, on a short-term trading opportunity in switching to Sandvik AB shares.

Commodities

Crude oil for July delivery rose 33 cents, or 0.5%, to $66.29 a barrel in after-hours electronic trading on the New York Mercantile Exchange. In London, Brent crude oil for July settlement dropped 4 cents to $70.98 a barrel on the ICE Futures Exchange.

Gold for immediate delivery was unchanged $670.75 an ounce. Silver fell 2 cents, or 0.2%, to $13.68.

Currencies

The euro inched down against the dollar and was at $1.3504 from $1.3506. Against the euro, the British pound traded little changed at 67.75 pence in London. It was also little changed versus the dollar at $1.9928 from $1.9925 yesterday. Against the dollar, the yen dropped to 121.24, falling from a three-week high of 120.78 and from 121.08 late in New York yesterday.


[R]5:30AM NY -4:30PM Mumbai Sensex is slightly higher in mid-afternoon trade Thursday.[/R]

The Sensex on BSE is up 2.36 points to 14,256.79 in mid-afternoon trading on Thursday.

Advancers

IT large-caps are firmly in positive territory on a weaker rupee against the dollar. Satyam has surged 3.6% to Rs 482, and Wipro has rallied 3% to Rs 548. Infosys and TCS are higher around 1% each at Rs 1,961 and Rs 1,210, respectively. Reliance Communications and Hindalco have advanced 1.5% each to Rs 524 and Rs 151, respectively.

Decliners

Hero Honda led the decliners in the Sensex stocks, down 2.49% to Rs 696. Index heavy Reliance Industries shed 0.36% to Rs 1,681. State Bank of India lost 1.24% to Rs 1,371 and ONGC dipped 0.69% to Rs 858. Larsen & Toubro declined 0.56% to Rs 1,912, despite the fact it secured a contract in United Arab Emirates.