US stocks: Blue-chip stocks take dip

NEW YORK - US blue-chip stocks ended a tad lower after Ford Motor Company slashed its earnings forecast, dragging on Dow component General Motors Corporation and other auto-related shares.

Falling US Treasury bond yields boosted bank stocks, but they also raised fears of a slowdown in Europe hurting US corporate profits in general. Oil prices hovering around US$58 a barrel were also an overhang on the market.

Ford shares fell 4.4 per cent, or 49 cents, to US$10.68 on the New York Stock Exchange after the company reduced its profit outlook for the year, following Tuesday's closing bell. Moody's Investors Service said it may cut Ford's debt ratings to junk status.

Shares of General Motors Corporation fell 3 per cent, or US$1.09, to US$34.82 and were one of the biggest drags on the blue-chip Dow average, while the stock of auto component maker Dana Corporation dropped 1.8 per cent to US$14.85.

The Dow Jones industrial average was down 11.74 points, or 0.11 per cent, to end at 10,587.93. The Standard & Poor's 500 Index was up 0.27 point, or 0.02 per cent, at 1,213.88. The technology-laced Nasdaq Composite Index was up 0.96 point, or 0.05 per cent, at 2,092.03.

US crude oil futures ended down almost US$1 on Wednesday after government inventory data showed a supply drop for the third week running, but within market expectations. Crude for August delivery settled down 95 cents at US$58.09 a barrel.

"Seems like investors are focused on oil prices, which traded in a tight range today and didn't indicate in which direction it would break, up or down," said Steve Neimeth, portfolio manager at AIG SunAmerica Asset Management.

The price of the benchmark 10-year US Treasury note climbed, while its yield dipped below 4 per cent, a key technical level, on talk of interest-rate cuts in Europe, soaring oil costs and a bold call from an influential fund manager suggesting the Federal Reserve may soon stop tightening interest rates.

The 10-year Treasury note's yield was at 3.94 per cent, down from 4.04 per cent at close, while its price, which moves in the opposite direction, was up 27/32 at 101-15/32.

Interest rates on different kinds of loans and mortgages are all tied partly to 10-year and 30-year Treasuries.

Bank stocks gained following the drop in US Treasury yields on optimism about lower borrowing costs and a likely increase in demand for loans. Dow component JPMorgan Chase & Company rose 0.6 per cent, or 22 cents, to US$36.26 and Wells Fargo & Company gained 0.4 per cent, or 22 cents, to US$61.71.

Still, one investment officer said that falling bond yields may not necessarily be good for stocks.

"Most of today is being overwhelmed by news from Europe that they are embarking on an easing campaign. While it is an outright positive for bonds, which had a big move to the upside, it was a mixed bag for stocks," said Jim Paulsen, chief investment officer at Wells Capital Management.

"On the surface, you may think lower rates is a good thing, but the bond market has also driven fears that there is a major slowdown coming out of Europe, which could affect everybody, including the United States," Paulsen said.

Shares of Dow component General Electric Company fell 1.2 per cent, or 43 cents, to US$35.72. The conglomerate, whose businesses range from jet engines to media group NBC Universal, said its global short-cycle industrial orders rose in May from a year ago, but the rate of increase fell from April.

Throughout the session, stocks were in a tight range and trading volume was lighter than usual. On the New York Stock Exchange, 1.35 billion shares changed hands, below the 1.46 billion daily average for last year. On Nasdaq, about 1.70 billion shares traded -- below the 1.81 billion daily average last year.

- REUTERS