Wall Street report: Tuesday close

13 April 2012

WALL STREET shares ended the session down as investors took profits after Monday's rally, while bonds sank after Federal Reserve Chairman Alan Greenspan downplayed the danger of deflation and forecast stronger US growth.

The benchmark 10-year US Treasury note's yield, which moves inversely to its price, jumped to a 10-week high after Greenspan told a congressional committee that the risk of deflation - a drop in prices that can erode profits and the economy's strength - was so remote it was unlikely that the Fed would have to take unusual policy steps.

That dealt a blow to the bond market, which was hoping the Fed might buy longer-term Treasuries to help drive yields down and keep deflation at bay. Greenspan also promised to keep US interest rates low for as long as it takes to stimulate growth, adding that more cuts were possible, if needed.

The dollar rallied against the euro and other major European currencies after Greenspan said the US economy 'could very well be embarking on a period of extended growth.'

In New York, oil futures prices ended at their highest levels in more than a month after Hurricane Claudette forced Gulf of Mexico producers to cut output. The dollar's strength sent gold down to settle just above two-month lows.

'Most of the comments from the Fed were better than people had anticipated,' said Keith Keenan, vice president of institutional trading at Wall Street Access. 'But, overall, people are in the mood to take profits ahead of earnings.'

The blue-chip Dow Jones Industrial Average shed 48.18 points, or 0.52%, to end at 9,128.97. The broad Standard & Poor's 500 slipped 3.44 points, or 0.34%, to 1,000.42. The tech-laced Nasdaq Composite fell 1.61 points, or 0.09%, to finish at 1,753.21.

After the closing bell, tech bellwether Intel said second-quarter earnings doubled from a year ago on strong sales of its Pentium and other chips that power personal computers. Intel shares jumped to $25.20 in after-hours trading. Earlier, they had risen 8 cents to close at $24.10 on Nasdaq.

During the regular session, Dow components McDonald's, Boeing and Altria Group were the three biggest percentage losers in the blue-chip Dow average.

Shares of McDonald's, the world's biggest fast-food restaurant chain, stock slumped 3.8%, or 84 cents, to $21.08 on disappointment that strong comparable-store sales will not result in higher earnings.

Boeing fell $1.14, or 3.3%, to $33.44 after the world's biggest US commercial jet maker and the No. 2 US military contractor said it would record second-quarter charges of about $1.1bn due to lower demand for satellite launch services and higher mission costs.

Shares of Altria Group slid $1.46, or 3.5%, to $40.50. An appellate court ruled on Monday that a judge did not have the authority to slash the bond Philip Morris USA must post while appealing against a $10.1bn verdict.

Bonds suffered after the White House warned that the federal government's budget deficit would balloon to $455bn this fiscal year and swell again in 2004. The 10-year T-note plummeted more than 2 full points to a price of 97-4/32, while its yield soared to 3.98% from 3.73% at Monday's close.

The two-year Treasury note slipped 7/32 to 99-11/32, while its yield rose to 1.46% from 1.34% on Monday. The 30-year bond plunged more than 3 points to a price of 106-3/32, while its yield surged to 4.97% from 4.77% on Monday.

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