Markets & Finance

Stocks End Mixed after Rally Fades


A modest recovery lost steam late in Monday's session amid fresh increases in bond yields and energy prices

Major stock indexes finished narrowly mixed Monday after faltering late in the session, unable to sustain a moderate rally from last week's plunge.

Rising bond yields and rebounding energy prices likely weighed on sentiment, according to Standard & Poor's MarketScope. The day brought no new economic news and only a few M&A deal announcements.

As markets try to recover from sell-offs last week, investors will continue to keep an eye on interest rates. The yield on the benchmark 10-year note ended Monday's session solidly above the 5% level as a Federal Reserve official said that inflation is the biggest risk to the economy.

On Monday, the Dow Jones industrial average ended nearly flat, up 0.57 points to 13,455.76. The broader S&P 500 index, was up 1.45 points, or 0.1%, at 1,509.12.

The tech-heavy Nasdaq Composite index lost 1.39 points, or 0.05%, to 2,572.15.

Stocks, after hitting record levels, plunged for three straight days last week before bouncing back on Friday. It was the worst week for stocks in three months.

In the energy markets Monday, July WTI crude rose $1.21 to $65.97 per barrel following reports Saudi Aramco said it would reduce supplies of its Arab Light and Arab Heavy crude grades to Japan, China, and South Korea by 9.5%

percent to 10% below the volumes set out in annual supply contracts. The move suggests OPEC is happy with current supply and demand levels, according to Standard & Poor's.

There were no significant economic releases Monday. Traders are eagerly awaiting news on inflation expected later this week. May Retail Sales and the Fed's Beige Book arrive on Wednesday; the May producer price index on Thursday; and May consumer price index, along with industrial production and capacity utilization, on Friday.

Among stocks in the news on Monday, Dow Jones Co. (DJ) was down slightly after a Wall Street Journal report that General Electric (GE) and Microsoft (MSFT) considered but abandoned a bid for the firm, which News Corp. (NWS) is already pursuing.

Peru Copper (CUP) was trading higher after it agreed to be acquired by Aluminum Corp. of China in a deal valued at 840 million Canadian dollars, or $6.60 per share in cash.

U.S. Steel (X) moved lower after reports a German steelmaker, ThyssenKrupp AG, denied it was interested in acquiring the firm.

CDW Corp. (CDWC) announced average daily sales in May were up 25.8% from May 2006, not including sales of Berbee Information Networks Corp., acquired last October.

Emcor Group (EME) spiked higher after it raised 2007 guidance to earnings per share of $2.75 to $3. The firm cited indications of strong demand in commercial, health care, gaming and hospitality markets.

Netflix Inc. (NFLX) was trading lower after being downgraded to underweight from neutral by J.P. Morgan analysts.

Nucor Corp. (NUE) dropped after saying it expected earnings to drop in the second quarter due to lower demand for its bar and sheet products. The news hurt other steel stocks.

Qwest Communications (Q) was lower on news chief executive Dick Notebart plans to step down.

European stocks fisihed up on Monday. In London, the FTSE 100 index moved 0.96% higher to 6,567.50. Germany's DAX index moved up 1.52% to 7,706.10. In Paris, the CAC 40 index was up 0.97% to 5,940.09.

Asian markets ended mostly higher. In Japan, the Nikkei index was up 0.31% to 17,834.48. In Hong Kong, the Hang Seng Index was up 0.52% to 20,615.49. And China's Shanghai Composite moved up 2.11% to 3,995.68.

Treasury Market

Treasuries closed lower in price Monday, but the market has stabilized after a plunge last week driven by growing concerns over inflation and the possibility of the Federal Reserve

raising interest rates later this year.

The 10-year note fell 09/32 in price to 95-03/32 for a yield of 5.14%. The 30-year bond tumbled 20/32 to 92-19/32 for a yield of 5.24%.

The market was hit early by Cleveland Federal Reserve president Sandra Pianalto's warning in a Dublin speech that long term inflation is too high for the cental bank's comfort.

Steverman is a reporter for BusinessWeek's Investing channel.

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