Stocks Fall after Bond Yields Rise
Stocks finished lower Monday, as interest-rate fears spurred by surging Treasury yields offset a blockbuster telecom merger. Lower oil futures weighed on energy shares without helping the broader market, says Standard & Poor's MarketScope.
The Dow Jones industrial average fell 63 points, or 0.57%, to 10,958.59, its lowest since mid-February. The broader Standard & Poor's 500 index slipped 8.97 points, or 0.7%, to 1,278.26, also a three-week low. The tech-heavy Nasdaq composite index dipped 16.57 points, or 0.72%, to 2,286.03.
Investors were digesting big M&A news Monday. AT&T (T) agreed to buy BellSouth (BLS) for $67 billion. The deal would create a phone behemoth with market capitalization of as much as $170 billion, larger than any other telecommunications operator in the world. AT&T shares slipped 3%, while BellSouth climbed nearly 10%.
The agreement also put focus on rival Verizon Communications (VZ). The company reportedly could respond by buying out its Verizon Wireless co-owner, Britain's Vodafone Group (VOD), or cellular competitor Sprint Nextel (S).
Investment firm Providence Equity's $3.4 billion purchase of secondary-school operator Education Management (EDMC) and media conglomerate NBC Universal's $600 million deal for women's Web group iVillage (IVIL) also drew attention. General Electric (GE) owns 80% of NBC Universal.
Meanwhile, commercial real estate service provider CarrAmerica (CRE) agreed to be acquired by an affiliate of the Blackstone Group in a deal valued at about $5.6 billion.
Outside of M&A news, BlackBerry maker Research in Motion (RIMM) reached a $612.5 million settlement with NTP Inc. that appears to end a long-running patent fight. The payment is bigger than Research in Motion's cumulative net income since launching its popular wireless device in 1999. Shares of competing handheld device maker Palm (PALM) dipped 7% as Morgan Keegan cut the stock from outperform to market perform.
General Motors (GM) was 3% higher after announcing it would sell the bulk of its stake in Suzuki Motors. GM said it will maintain a strategic alliance with the Japanese company.
Holding company Berkshire Hathaway (BRK.A) posted 54% higher quarterly profits over the weekend. CEO Warren Buffett also said the board has settled on an unnamed eventual successor to the 75-year-old billionaire investor.
In broker calls, Intel (INTC) was boosted from hold to buy at Citigroup (C). The chip maker warned Friday its first-quarter revenue would fall below earlier forecasts, but the broker says share prices already reflect most of the bad news.
Among other companies in the news, Anheuser-Busch (BUD) advanced modestly after a licensing deal that will allow Heineken Russia to brew, sell and distribute Anheiser-Busch's flagship brand under the Bud trademark in Russia.
In the energy markets, April West Texas Intermediate crude oil futures closed down $1.26 at $62.41 a barrel, amid speculation Iran may reach a nuclear agreement that would avoid conflict. Market consensus is that OPEC will not cut oil production when it meets Wednesday, says Action Economics.
On the economic front, U.S. January factory orders fell 4.5%, slightly less than expected, says Action Economics. Tuesday will bring a report on consumer credit and an estimate of fourth-quarter productivity.
European markets finished higher Monday. In London, the Financial Times-Stock Exchange 100 index rose 39.1 points, or 0.67%, to 5,897.8. Germany's DAX index added 32.6 points, or 0.57%, to 5,754.06. In Paris, the CAC 40 index gained 21.57 points, or 0.43%, to 5,010.72.
Asian markets finished higher. Japan's Nikkei 225 index rose 237.82 points, or 1.52%, to 15,901.16. In Hong Kong, the Hang Seng index edged higher 9.83 points, or 0.06%, to 15,811.83. Korea's Kospi index added 15.81 points, or 1.19%, to 1,344.76.
Treasuries extended a decline that started last week on increasing speculation of higher interest rates worldwide, says S&P MarketScope. Prices for 10-year Treasury notes closed lower at 98-04/32 with a yield of 4.74%, while 30-year bonds fell to 96-31/32 for a yield of 4.72%.