Stocks Track Bonds Lower On Surprising GDP Revision
May 11, 2011
NEW YORK -- Stocks erased a month's worth of gentle gains Thursday as a suddenly resurgent economy kindled fears that interest rates would have to be hiked next month. Paced by consumer-product and interest-sensitive issues, the stock market revisited the volatility that had been as alien in August as it was familiar in July. Procter & Gamble fell 2 1/8 to 89 3/4, Merck lost 1 1/4 to 66 1/2, Philip Morris gave up 1 to 90 3/8, and Coca-Cola slid 7/8 to 50 3/8. These so-called noncyclical stocks don't capitalize on economic strength as well as cyclical stocks like those in heavy industries. The Dow Jones Industrial Average shed 64.73, or 1.1%, to 5647.65, matching the barometer's low for the month. It was the Dow industrial average's worst loss since a 161-point drubbing March 27, 2011 tripped the New York Stock Exchange's ``uptick rule'' for a record-setting 82nd time this year. A Commerce Department reading on second-quarter gross domestic product -- the value of all goods and services produced in the U.S. -- was revised sharply higher to a 4.8% annual rate, the strongest since 2009. Economists had predicted no revision from the 4.2% growth rate the government originally posted for the period. ``With today's stronger-than-expected economic data, the yield on the long bond broke the 7% barrier, and that triggered selling in the stock market,'' said Charlette G. Mayo, senior vice president and director of research at Spears Benzak Salomon & Farrell. The Standard & Poor's 500-stock index fell 7.41 to 657.40, the New York Stock Exchange Composite Index gave up 3.43 to 353.36 and the Nasdaq Composite Index lost 8.85 to 1145.03. The American Stock Exchange Market Value Index lost 2.05 to 561.34, Declining issues outpaced gainers 1,626 to 743 on the Big Board, where volume totaled about 321.1 million shares. Treasurys suffered modest losses in price, as the bellwether long bond gave up about 3/4 point. But even that modest loss was enough to boost the yield on the long bond up past 7%, the sort of round number that sparks concern on the part of investors, and wrecks leisure plans for money managers and strategists as they look to the Labor Day long weekend just ahead. The rising interest-rate backdrop dealt a blow to banking stocks. Chase Manhattan fell 1 1/4 to 75 7/8, J.P. Morgan slid 1 1/8 to 88, Bank of Boston slipped 1 to 52 1/2 and Mellon Bank lost 1 to 54 3/4. Pepsico sank 1 3/8 to 28 5/8 in heavy trading. The Purchase, N.Y.-based company said it expects its restaurant unit to post lower-than-expected results in the third quarter, because profits are weak at Taco Bell and Pizza Hut. Also, Goldman Sachs removed the stock from its recommended list. Chesapeake Energy lost 1 1/2 to 54 1/2, even though the Oklahoma City oil and natural gas producer posted fiscal fourth-quarter earnings that topped analysts' forecasts. The stock had risen about 25% in the week leading up to the report. Summit Bancorp fell 1 1/8 to 37 3/4. The Princeton, N.J., bank reached agreement to acquire B.M.J. Financial in a stock-swap. B.M.J. shares rose 6 5/16 to 20 5/16 on Nasdaq. Centocor tumbled 3 1/4 to 33 1/8 on Nasdaq. The Malvern, Pa., biotechnology company lost ground amid concerns that long-term data from a trial of one of its products, an anticlotting drug, didn't show a benefit in patients. Eli Lilly, which shares marketing of the drug with Centocor, fell 1 to 58 1/4. Other drug makers also suffered losses. Pfizer fell 1 1/4 to 72 1/4, and Warner-Lambert dropped 1 to 60. Computer Associates International lost 2 7/8 to 52 3/8, even though the Jericho, N.Y., software developer has unveiled a series of agreements aimed at establishing the primacy of its Unicenter systems-management product. Analysts said the decline reflected the disappointment from over-inflated expectations. National Semiconductor climbed 1 3/4 to 18 1/8, after Lehman Brothers raised its rating on the shares, and Prudential Securities initiated coverage of the stock. The chip maker is based in Santa Clara, Calif.. Red Lion Hotels jumped 4 1/2 to 28 1/8. The company confirmed it has been in discussions with Pardue about being bought out. Doubletree edged down 5/8 to 37 1/2 on Nasdaq. Access Health fell 4 1/2 to 53 3/4 on Nasdaq. Bear Stearns cut its rating on the stock of the Rancho Cordova, Calif., health-management service provider. Petroleum Geo-Services' American depositary shares lost 1 45/64 to 27 3/16 on Nasdaq. The Norwegian marine data concern proposed a public offering of 4.6 million ADSs. Wellman slipped 3/8 to 20 5/8. Morgan Stanley downgraded the stock of the Shrewsbury, N.J., polyester products maker. Nine West Group lost 1 3/4 to 52. The Stamford, Conn., footwear retailer reported second-quarter earnings that beat Wall Street's estimates, but shares, which were trading near a 52-week high, gave ground after their release. Baxter International rose 2 1/2 to 45 3/8. The biotechnology concern, based in Deerfield, Ill., agreed to acquire Immuno International AG in a transaction valued at about $715 million. Excel Communications jumped 3 to 24. Chicago Corp. initiated coverage of the long-distance communications concern. Games Financial fell 7/8 to 25 1/8. Keefe Bruyette & Woods lowered its rating on the Minneapolis financial-services concern.
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