Dow drops while American bonds reach two-year high

Part of the sell-off came with
rising bond yields in the U.S. The
30-year US treasury bond was
yielding 6.23% at the end of the
day, its highest yield in two
years.

The big story was a 2% or
231.12-point drop in the Dow,
which closed at 10,417.06.
On the NYSE, stocks dropped by a
margin of 5-2 over stocks that
gained.

Speculation is mounting that
Thursday’s U.S. retail report will
indicate that prices are rising.
The U.S. Federal Reserve open
market committee will meet once
more before the end of the year.
Some analysts expect that meeting
to result in another interest-rate
increase to stave off rising
prices.

The only other indication of
inflation has been rising oil
prices, but that’s independent
of the US economy. And OPEC seems
to be increasing oil production
lately, so oil prices are falling
again.

Retail-related Internet stocks
took a beating today as well.
Amazon.com Inc. lost US$3.44
to close at $84.94, and Yahoo!
Inc. deflated by US$7.50 to
$173.87. The Amex Internet index
was down by more than 10%. Nasdaq
closed off from yesterday’s high
by 22.16, finishing at 1313.05.

Financial stocks were pummelled
too, by interest-rate worries.
There was expectation of reduced
demand for their services and the
lower value of their fixed-income
holdings. The Bloomberg Wall
Street Index lost 1.9%, even
though companies like Merrill
Lynch Inc. gained today because
of better-than-expected third-
quarter earnings reports.

Canada, in the meantime, didn’t
fair so badly. Rising gold prices
buoyed the market here, after
gold closed C$5.78 higher, to
$323.50 in London yesterday.
Barrick Gold Corp. traded
higher by as much as C$1.40
today on the TSE. Placer Dome
Inc. was also up a dollar, to
$22.10.

As many as 7 of the 14
subsectors were trading higher
in the middle of the afternoon
on the TSE, which inched up
19.17, to 7,135.21 at the end
of day. Industrials like
JDS Uniphase and Research
in Motion fared especially
well. Montreal also closed
marginally higher, by 13.99,
to 3,752.63.

The VSE dropped 4.30 to 420.62
in late Pacific trading,
although much of its losses were
coming at the expense of
non-mineral related stocks.