Banks applaud as yields rise, but Iraq worries stay
Tuesday, June 17, 2014 - 02:18
June 17 - Bank stocks led Wall Street high as a jump in consumer inflation led to the highest interest rate for the 10-year note in more than a month; UPS changing pricing method for ground service; Oil slips but Iraq worries linger. Conway G. Gittens reports.
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U.S. stocks rallying a bit, led by strength in the financials, but geo-politics are keeping gains in check.
The Dow up 27 points, the S&P 500 up 4 and the Nasdaq up 16 points.
Housing took a step back in May. Starts and building permits slipped more than expected, with groundbreaking dropping 6.5 percent to a seasonally adjusted annual pace of 1 million units. All this could mean the housing recovery is staying slow for a while.
But there was welcomed news on the inflation front. Higher costs for energy and food bumped up the Consumer Price Index. The uptick should comfort some Fed officials who worry inflation is running too low. Policymakers started a two-day meeting on Tuesday. The Fed is expected to trim again its monthly bond buying program, but not raise interest rates until mid-2015.
Jack Bogle, founder of The Vanguard Group, says the American economy has some challenges ahead.
SOUNDBITE: JACK BOGLE, FOUNDER, THE VANGUARD GROUP (ENGLISH) SPEAKING:
"U.S. economy looks pretty good, but it's hard to know whether we will be moving towards slower growth rate in our GDP, slowing down in economic growth. More or less the new normal, as it's called, will probably be lower than America's past rate of growth. It won't be terrible, it won't be shrinking, I don't believe, although there is always that risk."
Consumer prices also boosted yields on the 10-year Treasury note to a more-than one-month high of 2.65 percent, which lifted financial stocks.
Speaking of inflation, expect to pay more for shipping large packages via UPS ground delivery. The world's biggest package shipper is looking to offset rising fuel expenses by charging for size and weight. The pricing doesn't go into effect until after the end of year holidays. Shares of UPS rallied and rival FedEx was up ahead of quarterly results due Wednesday.
Investors were also looking at Iraq, where fighting shut a main oil refinery. Iraq's Shi'ite rulers refused to talk to Sunnis to defuse an uprising in the north of the country. U.S. crude prices slipped a bit, but remain elevated, above the 106-dollar mark.
In Europe, France tells rival bidders General Electric and Siemens to bid more if they want to buy Alstom. As for markets, merger speculation pushed stocks modestly higher on the day.
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