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Stocks, bonds lower after key economic data released

Stocks, bonds lower after key economic data released

Wall Street stepped back from a two-day rally on Thursday as investors waded through a battery of reports that indicated the U.S. economy's unexpected expansion might force the Federal Reserve to be more aggressive next year.
There has been speculation policymakers might be ready to cut interest rates on signs the economy was moderating on course. However, better-than-expected reports that measure existing home sales, consumer sentiment, and manufacturing in the Midwest lessened the possibility of a cut.
Instead, the trio of reports suggest central bankers _ who have left interest rates unchanged during their last four meetings _ might even have to employ a hike on further signs the economy is growing too fast. This caused a sell-off in the bond market, and stifled a stock market surge that pushed the Dow Jones industrials past the 12,500 mark for the first time.
The fact there was not a big drop in stock prices could be a sign that investors are still pretty positive, analysts said. With thin volume typical for the week between Christmas and New Year, the real response could come next week when most of Wall Street gets back from vacation.
"You'd expect some kind of correction after these reports, and the fact we're not getting one shows Wall Street is pretty bullish," said Ryan Detrick, equity analyst at Schaeffer's Investment Research. "With the market going up, and not too many sellers out there, we could stay at these levels until we get back next week."
In midday trading, the Dow Jones industrial average fell 20.03, or 0.16 percent, to 12,490.54, retreating from its record close of 12,510.57. The index also hit a record trading level of 12,519.22 on Wednesday.
Broader stock indicators were lower. The Standard & Poor's 500 index fell 3.26, or 0.23 percent, to 1,423.58, and the Nasdaq composite index gave up 8.51, or 0.35 percent, to 2,422.71.
Despite the dip during the session, major indexes are heading toward double-digit gains for the year. The Dow is now up 16.5 percent this year, while the Nasdaq has risen 9.9 percent and the S&P 500 is up 14 percent.
Bond yields have fallen to record lows in the past few months, but began to rebound on Wednesday after a better-than-expected government report on new home sales suggested the housing slump could be at the bottom of its decline. It was the first sign this week the economy might be expanding instead of moderating.
The three economic reports on Wednesday continued to push rates higher, with the yield on the benchmark 10-year Treasury note rising to 4.71 percent from 4.65 percent late Thursday.
Oil prices rose after the Department of Energy reported in its weekly inventory report that U.S. crude supplies dropped by 8 million barrels last week _ much more than most analysts expected. The rise was limited though as gasoline and heating oil supplies rose.
Demand for home heating fuels has been lagging because of mild weather, and pushed crude prices below $60 a barrel this week. A barrel of light sweet crude rose 17 cents to $60.51 on the New York Mercantile Exchange.
Meanwhile, the dollar was lower against other major currencies, while gold prices extended their rally.
Among the reports released early in the session, the Conference Board's index of consumer confidence climbed to 109 this month _ the highest since April. Economists expected a decline to 102.
Bolstering hopes the housing slump has bottomed, the National Association of Realtors reported sales of previously owned homes gained 0.6 percent to a 6.28 million annual rate in November _ besting economist projections for a decline.
With little in the way of corporate news, Apple Computer Inc. fell amid reports of a federal probe into the possible forgery of documents to boost executives' profit. Chief Executive Steve Jobs is said to have received 7.5 million stock options in 2001 without proper board approval. Shares fell $1.34 to $80.18.
International Business Machines Corp. and Simians AG won a 10-year $9.3 billion contract from the German Federal Armed Forces. The deal calls for the two companies to modernize non-military information and communications technologies.
Shares of IBM fell 3 cents to $97.17, while Siemens rose 95 cents to $98.53.


Updated : 2021-05-09 14:23 GMT+08:00