07 June 2007

Stocks fall as bond yields climb

Stocks Fall As Yields Climb - washingtonpost.com

The Associated Press
Thursday, June 7, 2007; 11:17 AM

NEW YORK -- Stocks fell for a third straight session Thursday after rising bond yields stoked concerns that an interest rate cut later in the year is less likely.

The 10-year Treasury note's yield surpassed 5 percent in overnight trading.

With rates rising in the market, the Federal Reserve is expected to be less inclined to cut short-term interest rates. And a dip in applications for unemployment benefits last week, which indicates a healthy labor market, also made a rate cut seem less likely.

Additionally, mixed May sales reports from major retailers indicated that consumer spending remains uncertain, particularly as gas prices rise and perhaps cut into consumers' spending money. While the array of fresh economic data didn't appear overly downbeat, stock market investors continued to pull back.

10-Year Treasury Yield Passes 5 Percent - washingtonpost.com

The Associated Press
Thursday, June 7, 2007; 10:45 AM

NEW YORK -- The yield on the Treasury's 10-year note passed 5 percent Thursday, hitting a 10-month high as investors see their hopes for an interest rate cut evaporating.

The 10-year yield broke through 5 percent mark overnight and rose as high as 5.07 percent in mid-morning trading in New York, reaching its highest point since late July. U.S. bond markets were following a trend toward lower prices and higher yields in trading abroad.

Some market experts say the 10-year yield is likely to climb higher as bond prices weaken _ making it even harder for consumers to finance home puchases, and also for companies to borrow money.

Fixed mortgage rates, closely linked to the 10-year yield, have been advancing recently, adding to worries about sluggish home sales and faltering home prices. The average U.S. 30-year fixed mortgage rate was at 6.12 percent Thursday, up from 5.98 percent a week ago, according to Bankrate.com.

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