Monday, June 11, 2007

Stocks Trade Flat As Bond Yields Rise (AP)

By TIM PARADIS - AP Business Writer

NEW YORK — Stocks recovered from early losses to trade flat Monday as investors grappled with higher bond yields and a partial rebound in oil prices from a sell-off Friday.

The yield on the Treasury's 10-year note rose to 5.14 percent Monday from 5.11 percent late Friday. Last week, investors took stubborn inflation to mean that a rate cut by the Fed was unlikely, and they sent stock and bond prices tumbling; since yields move in the opposite direction from bond prices, market interest rates soared. The 10-year Treasury yield climbed above 5 percent for the first time since last summer. The Fed has kept the federal funds rate, the interest banks charge each other for overnight loans, unchanged at 5.25 percent since last summer, following a string of increases over about two years.

While U.S. stocks rose sharply Friday, Wall Street still logged its worst week in about three months amid interest rate concerns.

"I don' think that there is a lot of clarity as to monetary policy for the rest of 2007 and I think that in general puts markets on edge," said Les Satlow, portfolio manager at Cabot Money Management. "I think it's a reflection of institutional ambivalence," he said of the back-and-forth direction of stocks.

In midday trading, the Dow Jones industrial average rose 6.26, or 0.05 percent, to 13,430.65.

Broader stock indicators rose. The Standard & Poor's 500 index rose 2.77, or 0.18 percent, to 1,510.44 and the Nasdaq composite index advanced 2.24, or 0.09 percent, to 2,575.78.

Stock markets abroad rose after steep declines last week. Japan's Nikkei stock average rose 0.31 percent and China's often-volatile Shanghai Composite Index rose 2.1 percent. Britain's FTSE 100 rose 0.96 percent, Germany's DAX index advanced 1.52 percent, and France's CAC-40 rose 0.97.

Oil prices, which also stirred inflation concerns last week, rebounded Monday after falling sharply Friday. Iran's oil minister said Monday the Organization of Petroleum Exporting Countries doesn't plan to release more oil into the market ahead of its next policy meeting in September. Light, sweet crude rose 73 cents to $65.49 per barrel on the New York Mercantile Exchange.

Amid an absence of economic and earnings reports, investors will likely focus on moves of individual stocks as they await data on inflation due later in the week. On Thursday, the Labor Department releases its producer price index and on Friday the consumer price index is due.

"If the Fed isn't going to clearly telegraph what it's going to do, then we'll just have to pay a little more attention to what the companies say and go on a case by case basis," Satlow said, referring to the mood among many investors.

The Fed's message on inflation has been that it remains too high and that holding down rising prices remains its focus. Cleveland Fed President Sandra Pianalto, speaking in Germany on Monday, said U.S. inflation remains higher than the Fed would like and that spikes in prices, liquidity crises or fiscal imbalances could upend central banks' notions of how contained inflation might be.

In corporate news, Neurochem Inc. rose $1.33, or 23 percent, to $7.08 as investors awaited an update Monday on Alzhemed, a drug in development for treatment of Alzheimer's disease.

Biotech drug maker Medivation Inc. soared $4.09, or 25 percent, to $20.26 after the company said its Alzheimer's drug Dimebon showed favorable results. The company's previous 52-week high was $21.85.

Steelmaker Nucor Corp. warned its second quarter profit will fall because customers had increased orders in the first quarter ahead of an expected increase in prices, making for lower orders in the second quarter. Nucor fell $4.13, or 6.2 percent, to $62.48.

Bearingpoint Inc. fell 22 cents, or 3 percent, to $7.38, after a Jefferies analyst lowered his rating on the management and technology consulting company citing increased competition and lower demand in the sector. The dollar was mixed against other major currencies, while gold prices rose. Declining issues outnumbered barely outpaced advancers on the New York Stock Exchange, where volume came to 558.4 million shares. The Russell 2000 index of smaller companies fell 1.92, or 0.23 percent, to 833.39.

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