While you were sleeping: US shares gain as bond yields ease; GM deadline looms

Friday 29th May 2009

Shares on Wall Street climbed as Treasury bond yields eased, soothing concern the U.S. faces higher borrowing costs, while oil producers climbed with the price of crude.

The Standard & Poor’s 500 rose 1.5% to 906.83 and the Dow Jones Industrial Average climbed 1.3% to 8403.80. The Nasdaq Composite climbed 1.2% to 1751.79.

JPMorgan Chase advanced 5.7% to US$36.65, leading the Dow higher, while American Express rose 3.4% to US$24.30.

Chevron rose 1.9% to US$65.81 and Exxon Mobil gained 1.4% to US$69.23 as the price of oil rose above US$65 a barrel on upbeat comments from OPEC that demand will revive.

U.S. Treasuries snapped a week-long slide amid doubts the world’s biggest economy will revive soon.

The yield on 10-year Treasuries fell 7 basis points to 3.67%. The spread between two year and 10-year yields narrowed from a record gap of 2.73%. Yields climbed yesterday amid concern the flood of new bond sales - US$3.25 trillion by September according to Goldman Sachs - will stymie the Federal Reserve’s efforts to keep interest rates low.

Bill Gross, who oversees the US$150 billion Pimco Total Return Fund at Pacific Investment Management, said investors are “beginning to wonder who is going to be buying these bonds,” Bloomberg reported.

Orders for durable goods rose 1.9% in April from the previous month, paced by a pick-up in sales of vehicles, according to the Commerce Department. The decline in March was revised to a drop of 2.1%.

New home sales rose a lower-than-expected 0.3% in April to an annual pace of 352,000 in April, according to the Commerce Department.

U.S. mortgage delinquencies and foreclosures rose to a record in the first quarter, according to the Mortgage Bankers Association. The delinquency rate rose 9.1%, seasonally adjusted, while the proportion of loans entering foreclosure gained to 1.37%. One in eight Americans is now late on a payment or in foreclosure, the association said.

Home improvement chain Home Depot Inc. sank 2.7% to US$22.70, the biggest decline on the Dow.

General Motors shares fell 2.6% to US$1.12. The automaker will file for bankruptcy on June 1, the third biggest in U.S. history, and sell most of its assets, Bloomberg reported, citing people familiar with the situation.

The U.S. Treasury will provide financing while the sale of assets is arranged to a company formed by the government, GM said in a regulatory filing, according to the report.

Separately, auto part makers Visteon Corp. and Metaldyne Corp. filed for bankruptcy. Visteon said it had the support of Ford Motor Co., its former owner, for the restructuring to ensure it can continue to supply parts.

The yen had its biggest decline in eight weeks amid signs Japanese demand for overseas assets is growing, requiring them to sell their currency to make the purchases. Japanese investors lifted purchases of overseas bonds last week, according to the Ministry of Finance.

The yen weakened to 96.92 against the dollar from 95.34, and fell to 135.06 per euro from 131.83. The dollar fell to $1.3935 against the euro from $1.3825.

Copper prices rose as the U.S. durable goods report stoked optimism demand will rise for the metal used to make pipes and wires.

Copper futures for July delivery rose 0.7%, to $2.135 a pound on the New York Mercantile Exchange.

Crude oil climbed to a six-month high after OPEC left production quotas unchanged and figures showed U.S. inventories fell.

Crude oil for July delivery rose 2.4% to US$64.99 a barrel on the New York Mercantile Exchange. Futures reached $65.44, the highest since Nov. 10, when prices touched $65.56.

Oil has gained 46% this year while copper is up about 50%. Gold futures for August delivery were little changed at $955.20 in New York.

Stocks in Europe declined, with the Dow Jones Stoxx 600 Index falling 1.2% to 207.93. Wolseley Plc, the world’s biggest supplier of plumbing and heating equipment, tumbled 18%, the slide on the Stoxx 600, after forecasting no pick up in earnings this year.

The U.K.’s FTSE 100 fell 0.7% to 4387.54, France’s CAC 40 dropped 1% to 3263.70 and Germany’s DAX declined 1.4% to 4932.88.

Businesswire.co.nz

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