VOL. 42 | NO. 16 | Friday, April 20, 2018
US stocks wobble and bond yields set four-year highs
NEW YORK (AP) — U.S. stocks couldn't hang on to an early gain and finished mostly lower Monday as technology companies slipped. Bond prices continue to fall and the yield on the 10-year Treasury note drew closer to 3 percent, a milestone it hasn't reached since January 2014.
Investors once again focused on corporate deals Monday as utility company Vectren agreed to be bought by CenterPoint Energy for $6 billion, while the CEO of Sears called for the company to sell more assets and health care products company Henry Schein said it will split off its animal health unit. Aluminum producers tumbled after the Treasury Department moved to ease sanctions against Russian aluminum company Rusal.
Stocks have faded over the last few days as bond yields continued to climb. The yield on the 10-year Treasury note continued to trade at four-year highs, rising to 2.98 percent from 2.96 percent. Bond yields have climbed this year as investors are starting to see signs that inflation is picking up and the Federal Reserve continues to raise interest rates. The 10-year yield stood at 2.43 percent at the end of 2017.
Since the global financial crisis in 2008-09, a combination of low inflation expectations and a bond-buying program by the Federal Reserve have helped keep bond yields low. That pushed stocks higher by making bonds less appealing by comparison. With the Fed no longer buying bonds and investors expecting greater inflation, analysts say higher yields could make bonds more attractive.
Duane McAllister, senior portfolio manager for Baird Advisors, said he doesn't think rising yields are a problem for the stock market. He said they are an opportunity for investors to diversify their holdings at a time of increased market volatility.
"Three percent is an important milestone on the continued trend toward higher interest rates," he said. "It shouldn't lead anyone, whether you're an individual investor or an institutional investor, to run for the hills."
The S&P 500 index rose 0.15 points to 2,670.29. It rose as much as 12 points before midday. The Dow Jones industrial average fell 14.25 points, or 0.1 percent, to 24,448.69. The Nasdaq composite gave up 17.52 points, or 0.2 percent, to 7,128.60. The Russell 2000 index of smaller-company stocks declined 2 points, or 0.1 percent, to 1,562.12.
Earlier this month, a Bank of America Merrill Lynch Global Research survey of fund managers concluded that if the 10-year yield rises to 3.50 percent, investors will start buying bonds while selling stocks. And when bond yields rise, it pushes up interest rates on mortgages and other kinds of loans, making it more expensive to borrow money. That can slow down economic growth.
Aluminum companies fell sharply after the Treasury Department extended a deadline for U.S. companies to stop doing business with Rusal. The department also said it could change its stance on sanctions against the Russian aluminum company if billionaire businessman Oleg Deripaska gives up control. Earlier this month the U.S. imposed sanctions that bar citizens from doing business with numerous Russian businessmen, including Deripaska, as well as several Russian officials and companies. That followed U.S. frustration with Russian policy in Syria and Ukraine, as well as alleged election interference.
Alcoa plunged 13.5 percent to $51.90 and Century Aluminum gave up 53 percent to $16.72. The stocks had rallied after the sanctions were announced.
Walmart fell 1 percent after Bloomberg reported that the retailer might spend $12 billion to buy the majority of Indian e-commerce company FlipKart.
The CEO of Sears, Eddie Lampert, called for the struggling retailer to sell the Kenmore brand and its home improvement business. ESL Investments, Lampert's hedge fund, said it might buy the home improvement assets and is willing to make an offer for Kenmore as well. Sears has been closing stores, cutting costs and selling brands as its sales fall. Its stock rose 7.6 percent to $3.24.
Health care products company Henry Schein jumped after it said it will spin off its animal health business. That division will combine with Vets FirstChoice as a new publicly traded company, and Henry Schein expects to get at least $1 billion in cash from the tax-free move. The stock gained 6.8 percent to $73.79.
Benchmark U.S. crude oil reversed an early loss and rose 0.4 percent to $68.64 a barrel in New York. Brent crude, used to price international oils, gained 0.9 percent to $74.71 per barrel in London. That helped energy companies finish higher. Wholesale gasoline rose 1.3 percent to $2.12 a gallon. Heating oil rose 0.8 percent to $2.14 a gallon. Natural gas stayed at $2.74 per 1,000 cubic feet.
Gold and silver prices tumbled. Gold fell 1.1 percent to $1,324 an ounce and silver fell 3.4 percent to $16.59 an ounce. Copper lost 0.8 percent to $3.11 a pound.
The dollar rose to 108.65 yen from 107.60 yen. The euro fell to $1.2205 from $1.2283.
The CAC 40 in France gained 0.5 percent. Britain's FTSE 100 rose 0.4 percent, and Germany's DAX added 0.3 percent. Tokyo's Nikkei 225 fell 0.3 percent and South Korea's Kospi shed 0.1 percent. Hong Kong's Hang Seng declined 0.5 percent.
AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP . His work can be found at https://apnews.com/search/marley%20jay