Stocks Fluctuate as Bond Yields Soar; BofA Rises
Stocks fluctuated Wednesday, but remained under pressure as the dollar gained and Treasury bond yields soared to six-month highs.
Stocks have been wavering for most of the session as investors wait for more direction on a compromisereached between President Obama and the Republicans on extending Bush-era tax cuts. Senate Democratic Leader Harry Reid said the plan could move more quickly than expected.
The Dow Jones Industrial Average was popping in and out of positive territory after ending mixed in the previous session as a rally sparked by the tax cut compromise faded amid news that Federal officials were pursuing more companies in an insider trading probe.
McDonald's and Boeing slipped while Bank of America , Intel and JPMorgan climbed.
The S&P 500 and tech-heavy Nasdaq were trading higher. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose near 18.
Among key S&P sectors, materials, utilities and industrirals fell, while financials and technology rose.
Investors have their eyes on the dollar , which has been gaining against a basket of currencies, as well as Treasury yields, which rose as the proposed extension of tax cuts sparked fears of inflation. Stocks and the dollar have been moving in opposite directions of late.
An auction of $21 billion in reopened 10-year Treasurys will take place at 1 p.m.
Gold prices have been falling sharply, trading below $1,380 an ounce. Gold recovered slightly after breaking immediate support at $1,375 an ounce earlier. And oil prices slipped below $88 .
There were also jitters that China will raise interest rates before the year-end. The worries were spurred by rumors that the increase in the consumer price index topped 5 percent in November.
“The enthusiasm was tempered a bit today by China potentially tightening,” said Dan McMahon, director of equity trading at Raymond James. “That’s what taken a bit of the bid out of the market.”
Still, McMahon said the trend is the market is to move higher, given signs of strength in the economy and the Federal Reserve’s efforts to boost the economy through bond purchases. Additionally, a “fair amount of cash” remains on the sidelines, McMahon said.
European shares closed at a 26-month highamid expectations that concerns about the euro zone debt crisis will abate and financials will perform well.
Costco released stronger-than-expected quarterly profit results and the retailer said revenue and traffic saw improvement at its U.S. stores, with the weaker dollar helping international sales.
Home Depot rose after the home improvement retailer raised its outlook for 2010 sales and profits for the second time as homeowners slowly return to renovation projects.
But McDonald's slipped after the fast-food chain reported a smaller-than-expected rise in same-store global salesin November, as demand weakened in the U.S. and Japan.
Fortune Brands gained after announcing plans to split into three separate businesses, giving investors a pure-play in spirits, home and security, and golf. Fortune Brands makes Jim Beam scotch, Moen faucets and Titleist golf balls.
And 3M shares slumped for a second day after Goldman Sachs downgraded the diversified manufacturer from "buy" to "neutral," saying relative valuation is less compelling.
Johnson & Johnsonlaunched its $2.3 billion bid for Crucell, a Dutch biotech company, despite opposition from some investors and production problems with a Crucell vaccine.
Orexigen Therapeautics skyrocketed more than 100 percent after news the biopharmaceutical company's weight-loss pill, Contrave, was backed by a panel of experts advisers to the FDA.
Salesforce.com advanced after the tech firm said it has agreed to buy privately held cloud-platform company Heroku for up to $249 million to expand its presence in cloud computing related to social and mobile applications. In addition, at least five brokerages raised their target prices on the company.
Men's Wearhouse shares tumbled more than 10 percent after the specialty retailer said it forecasts a fourth-quarter loss wider than estimates. This comes after women's clothing retailer Talbots said sales could fall during the crucial holiday season and that it might report a fourth-quarter loss from continuing operations. Shares of the women's clothing retailer were trading lower for a second day after plunging more than 20 percent on Tuesday.
Shares of Starwood Hotels fell after the owner of Sheraton and W hotels backed its 2010 outlookand outlined a strategy that will require sales of some hotels.
On the IPO front, shares of two Chinese companies soared in their U.S. stock market debuts.
Online video company Youku.com opened at $27, 110.9 percent above its $12.80 IPO price. And shares of online retailer E-Commerce China Dangdang opened at $24.50, 53.1 percent above their $16 IPO price.
On the housing front, the Wall Street Journal reported that Fannie Mae and Freddie Mac were in discussions with officials over government programs intended to help home owners who owe more than the values of their homes.
And applications for U.S. residential mortgages fell 0.9 percent to 603.5 for the week ended Dec. 3, as refinancings slipped by 1.4 percent, according to the Mortgage Bankers Association. Loan requests for home purchases rose for a third straight week by 1.8 percent to 210.9.
Asian stocks closed mostly in the red with the South Korean Kospi index falling after North Korea fired artillery into its own waters.
On Tap This Week:
WEDNESDAY: 10-year Treasury note auction.
THURSDAY: BOE announcement, jobless claims, wholesale inventories, 30-year Treasury bond auction, DuPont investor day; before-the-bell earnings from Lululemon and National Semi
FRIDAY: International trade, import and export prices, consumer sentiment, and Treasury budget
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