Wall Street mixed as bond yields rise, service sector shows growth
By Madlen Read AP Business Writer
NEW YORK (AP) – Stocks closed mixed in uneven post-holiday trading Thursday as a rebound in bond yields stifled Wall Street’s excitement about new buyout activity and strength in the U.S. service sector.
The Institute for Supply Management’s index of service sector activity rose to 60.7 in June from 59.7 in May, indicating that non-manufacturing industries saw slightly faster expansion. The figure was better than expected, fueling sentiment that the economy is recovering from a slow first quarter.
However, the data weighed on bond prices, which were already weak after payroll company Automatic Data Processing and consultancy Macroeconomic Advisers said the private sector added 150,000 jobs last month – a good sign that the Labor Department’s report on June nonfarm payrolls Friday will show a solid rise.
As bond prices fell, the 10-year Treasury note’s yield shot up to 5.14 percent Thursday from 5.04 percent Tuesday, ahead of the July 4th holiday. On Monday, the 10-year yield had slipped below the 5 percent level for the first time since early June.
Robust data can be double-edged for the stock market; though investors want the economy to strengthen, they remain worried that it will cause interest rates to rise, which can slow down business.
But the 10-year Treasury yield would have to rise significantly to do any real damage to the stock market, said Joe Balestrino, a portfolio manager at Federated Investors Inc. “If things are good, yields are supposed to be a little higher.”
Also hurting the Dow Jones industrial average was General Motors Corp., one of the blue-chip index’s 30 components. GM was downgraded by a Bear Stearns analyst after the automaker on Tuesday posted a 21.3 percent drop in June sales compared to last year.
According to preliminary calculations, the Dow fell 11.46, or 0.08 percent, to 13,565.84.
Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index rose 0.53, or 0.03 percent, to 1,525.40, while the Nasdaq composite index rose 11.70, or 0.44 percent, to 2,656.65.
The technology-laden Nasdaq was lifted in part by Apple Inc., which rose $5.71, or 4.5 percent, to $132.88 after hitting an all-time high on continued enthusiasm over the iPhone. BlackBerry maker Research In Motion Ltd. also buoyed the Nasdaq, reaching a record high after saying it got cleared to sell its smartphones in China. Research in Motion rose $8.34, or 4 percent, to $216.28.
Many on Wall Street remained confident about stocks amid takeover news. Hilton Hotels Corp. agreed Tuesday to an all-cash buyout from Blackstone Group in a $20.1 billion deal; chemical company Huntsman Corp. said Wednesday a private equity firm made a cash buyout offer of about $6 billion that trumps last week’s bid from a Dutch company; and a Coca-Cola Co. spokesman said Wednesday the company is looking into buying Cadbury Schweppes PLC’s Snapple iced tea brand or building its own tea brand.
After agreeing to private equity buyouts, Hilton Hotels soared $9.40, or 26.1 percent, to $45.45, and Huntsman jumped $3.06, or 12.5 percent, to $27.46.
Coca-Cola slipped 26 cents to $52.64, while GM fell $1.20, or 3.2 percent, to $36.78 after the analyst downgrade.
The dollar rose against most major currencies on strong U.S. economic data, and gold prices fell. Meanwhile, the European Central Bank indicated it might raise rates later in the year than some analysts had expected, pressuring the euro lower.
Light, sweet crude futures bounced back from earlier losses, rising 40 cents to $71.81 a barrel on the New York Mercantile Exchange. Unrest in Nigeria, a major U.S. oil supplier, offset a report from the Energy Department showing oil and gasoline inventories increased last week.
Declining issues outnumbered advancers by about 4 to 3 on the New York Stock Exchange, where volume came to 1.25 billion shares. Trading volumes were relatively light with many of the big players out of the office following the July 4th holiday.
“Direction buyers aren’t there,” said Bill Groenveld, head trader for vFinance Investments.
The Russell 2000 index of smaller companies rose 1.93, or 0.23 percent, to 850.13.
Overseas, the often-volatile Shanghai Composite Index plunged 5.3 percent on worries about government steps to cool down the market and concerns that several new share listings could dampen prices.
Japan’s Nikkei stock average rose despite the drop in China’s stock market, gaining 0.29 percent. Britain’s FTSE 100 fell 0.57 percent, Germany’s DAX index fell 1.09 percent, and France’s CAC-40 fell 0.63 percent.
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AP-ES-07-05-07 1632EDT