Rise in bond yields cools off stocks

Treasury and money markets data on the Bloomberg terminal.
Treasury and money markets data on the Bloomberg terminal.

By: Marika Bastrmajian

U.S. stocks took a breather Wednesday, after five days of record gains, amid declining oil prices and a rise in bond yields.

The Standard & Poor’s 500 closed marginally lower Wednesday at 2,038.12, down 1.56 points, while the Dow Jones Industrial Average closed at 17,611.66, a slight drop of 3.24 points. The NASDAQ Composite Index rose 14.06 points to close at 4,674.62.

Stocks started the day with broad losses based on global unease as Russian troops crossed the Ukrainian border and a drop in European stocks after six major banks agreed to pay $4.3 billion to resolve an investigation into rigging spot foreign exchange prices.

Bond prices, which were higher in the morning, later fell after the U.S. Treasury announced the results of its auction of $24 billion of 10-year notes. The securities drew only lukewarm demand, which analysts attributed to anticipation of Federal Reserve rate hikes next year.

The yield on the current 10-year benchmark Treasury note rose to 2.37 percent from Monday’s close of 2.36 percent. Investors track Treasury yields as an indicator of the future direction of consumer interest rates on home mortgage and other loans.

“We expect yields to begin rising in the new year in preparation for the Fed’s first rate hike, which we continue to forecast for September 2015,” according to a fresh forecast released Wednesday by Northern Trust Co.

The rise in bond yields hurt utility stocks, while lower oil prices pressured the energy sector. Transocean Ltd., an offshore drilling contractor, was the worst performer with shares losing 5.71 percent to close at $27.08.

Consumer retail stocks led gainers as Macy’s and other retailers reported stronger-than-expected earnings. Shares of Fossil Group Inc. rose 8 percent to close at $112.48 after reporting a 19 percent increase in third quarter earnings.

The Commerce Department reported that wholesale inventories for September rose 0.3 percent, compared with a revised rise of 0.7 percent in August, while sales rose 0.2 percent, compared with a revised decline of 0.7 percent.