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Higher interest rates and inflation fueled concerns about corporate borrowing costs, and this took most blue-chip stocks Southwards. While the markets once again tried to push to new highs for the indices, the rally stalled and higher bond yields may be weighing on the minds of investors.

Today, the Dow Jones industrial average closed down 65.00 or 0.6% to 11,150.70, the broader Standard & Poor’s 500 index closed down 2.64 or 0.2% to 1,300.25, and the Nasdaq composite index closed up 3.04 to 2,340.82, closing at a fresh nearly five-year high.

Market breadth was mixed. On the New York Stock Exchange, losers beat winners nine to seven on volume of 1.61 billion shares. On the Nasdaq, decliners and advancers were narrowly mixed as 2.19 billion shares changed hands.

On the economic front, the U.S. economy grew at a 1.7% annualized rate in the fourth quarter, up from an initial estimate of 1.6%. However, the gross domestic purchases price index, an inflation gauge, increased 3.7% annualized. While investors took the weak number in stride, due to recent signs that the economy has rebounded strongly in the first quarter; the inflation gauge is a cause for concern.

The advance today ran into trouble as the rise in bond yields picked up fresh steam. Yields have been rising since the Fed started boosting rates and said that more rate hikes may be needed. The combination of rising bond yields, rising oil prices and a jump in gold and copper all put pressure on stocks, especially the blue chips. There are worries that the Fed will be forced to tighten more to quash inflation. The fear is that they tighten so much that it hurts the economy and hurts corporate profits. However, the decline today was lower than the gains yesterday and this is a positive aspect.

The biggest loser today was General Motors that slipped down $1.09 or nearly 5% to $21.06. The company is close to selling a majority stake in its GMAC finance unit to an investor group led by Cerberus Capital, and is discussing selling its stake in Isuzu Motors. However, it is opined that any deal for the finance unit would not be enough to return GMAC to the investment-grade status.

Stock of Google closed down $6.54 or 1.6% to $388.44, after the Internet search giant filed with regulators to periodically sell up to 5.3 million shares of stock. The company stated that it was making more shares available to the marketplace in an effort to absorb the demand from index funds following the company’s inclusion into the S&P 500.

The Nasdaq Stock Market closed down 4.3% to $40.06, after dropping its $4.2 billion bid for the London Stock Exchange after failing to win the recommendation of the U.K bourse. The stock of fell LSE ended 6.8% lower in London trading.

Vonage, a company the is hemorrhaging money, may be trying to shop itself to a larger telecom firm. While it filed to go public nearly two months ago it has yet to file any amended registration statements with the SEC. This has led to speculation about whether Vonage might be looking to sell out instead. This might affect the price of the share in the near future.

U.S. light crude oil for May delivery jumped 70 cents to $67.15 a barrel on the New York Mercantile Exchange on supply concerns ahead of the summer driving season. The U.N. Security Council unanimously adopted a “presidential statement” late on Wednesday calling on Iran to freeze its uranium enrichment work. However, Tehran has rejected this demand and traders are worried the dispute could result in a disruption of crude shipments from Iran.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter