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Stocks declined Monday as the dollar and U.S. Treasury yields soared after last week's jobs report, prompting speculation that the Federal Reserve may raise rates at its next meeting.
McDonald's [MCD
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] skidded after the fast-food giant reported its same-store sales rose 5.1 percent in May but missed the mark and said currency fluctuations could dent the current quarter's earnings.
Banks rebounded from an early decline. Today is the deadline for federal regulators to approve capital-raising plans at nine of the nation's largest banks. But it also coincides with mandatory management reviews for the companies, and that is creating problems among some of those institutions, the Wall Street Journal reported.
Among the companies affected were Bank of America [BAC
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] and Citigroup [C
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] — both stocks were in a yo-yo pattern in Monday's trading.
Cisco [CSCO
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] and Travelers [TRV
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] made their debut on the Dow today, replacing General Motors [GMGMQ
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] and Citigroup.
Meanwhile, some large institutions will be allowed to repay federal bailout money, spurring worries that if they're allowed to repay too soon, it could make things more difficult should the institutions need more money again later.
And Chrysler said it may be forced to liquidate if the Supreme Court agrees to delay its sale to Italy's Fiat. An Indiana pension fund and consumer groups petitioned the high court.
Friday's surge in the unemployment rate to 9.4 percent also seemed to be taking its toll on the stocks outlook for Monday.
"With the unemployment rate hitting levels not seen for over 20 years, the announcement of the 37th bank failure of 2009 and news that credit-card delinquencies rose by 11 percent for the 1st quarter, investors are starting to take some money off the table," GFT wrote in its morning forecast.
Asian and European markets declined, with commodity stocks dragging down the indexes on softer raw material prices. Some profit-taking in the basic resource sector may take place, after last week's sharp rise after mining giants Rio Tinto [RTP
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] and BHP Billiton [BHP
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] agreed to an iron-ore joint venture, according to various analysts.
>> Oil Rally Is Over—The Bottom Is $60
The yield curve on government bonds is likely to become steeper, David Roche, global strategist at Independent Strategy Limited, warned on CNBC while Thio Chin Loo, senior currency strategist at BNP Paribas, said that the main theme of the week will be to shift away from stocks and into higher-yielding assets.
The auction of about $65 billion in 3-, 10- and 30-year Treasury notes takes place this week.
Oil also fell Monday after posting its largest one-day rise in more than five months on Friday.
Tech was in focus as Apple's [AAPL
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] developers conference begins today. Hopes are that Apple CEO Steve Jobs will attend the event after taking medical leave from the company. Also, there are grumblings in the Applesphere that a new iPhone may be debuted at the conference.
>> Jobs: Will He or Won't He?
>> Get the Latest Updates in Jim Goldman's Live Blog From the Conference
This comes after Palm's [PALM
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] answer to the iPhone, the Pre, debuted last week to rave reviews.
Shares of Dow component AT&T [T
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] skidded after Goldman Sachs removed the company from its "conviction buy" list on belief that investors may cycle out of telecoms.
On the other side of the pond, Barclays confirmed it's in talks with BlackRock and Bank of New York Mellon to sell its investment arm, Barclays Global Investors (BGI) for $12 billion. BlackRock is said to be the frontrunner.
Kohlberg Kravis Roberts [KFN
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This Week:
MONDAY: Apple developers' conference
TUESDAY: Joint congressional hearing on TARP oversight; Manpower quarterly employment-outlook survey; wholesale trade
WEDNESDAY:Weekly mortgage applications; Fed's Evans speaks; Weekly crude inventories; federal budget; Fed's beige book
THURSDAY: Retail sales; weekly jobless claims; business inventories; Fed's Lockhart speaks; Earnings from Nat Semi
FRIDAY: Import/export prices; consumer sentiment
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