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All Eyes on the Bond Market

Stocks have been following the bonds recently and this is a key spot, traders say.

Monday, even though people didn't expect it, stocks put in a big rally. Tuesday, again though people didn't expect it, stocks sold off hard.

A hard market to predict, but that in itself tells you something. Stocks have put in some good gains, with broad participation for a change, but they look a little tired lately. The story -- a good earnings period, the rotation into cyclicals -- is getting a little bit old, and the market hasn't found a new one to latch onto yet. To some degree, stocks have been trading off the bond market -- but that, too, has been in disarray as traders try to figure out the degree to which the world economy is recovering, and how that will affect the U.S. And with the long bond at the bottom of its range this morning, there's a lot of nervousness out there.

"All eyes are on the bond market today," said Todd Clark, head of listed trading at

Charles Schwab

. "Right now, we're at our lows of the year. That has got to hold. It's a big spot, and people are watching it."

With the bonds hanging in there, stocks look like they'll show a bit of a bounce this morning. At 9 a.m. EDT, the

S&P 500

futures were off 0.9, better than 4 above fair value and indicating strength at the open. Treasuries are lending a bit of support. The 30-year was up 1/32 to 93 13/32, putting the yield at 5.71%.

Though its market was closed, Tokyo did have a little news today.

The Nihon Keizai Shimbun

reports that

Bank of Tokyo Mitsubishi


plans a public share offering on the

New York Stock Exchange

in July -- the first for a Japanese financial institution -- worth up to $3 billion. A good and bad thing. It improves U.S. recognition for the bank, and the funds raised will be used to write off bad loans. But then, of course, it is dilutive.

Wall Street's losses had a less-than-profound effect on Hong Kong's market, where strength in the property sector helped lift the

Hang Seng

26.52 to 13,586.21.

But in an odd way, maybe Hong Kong ignoring the fall in U.S. stocks makes some sense. If the trouble in New York yesterday was the bond market, and the trouble in the bond market was a perception that the world is coming back from the precipice quicker than thought, and rates are heading higher, how's that a problem for Hong Kong? Though deeply affected by U.S. interest rates, even more important for Hong Kong's economy is Asia getting back on track.

European bourses were lower. In Frankfurt, the


was down 65.58, or 1.2%, to 5317.63. In Paris, the


was off 48.81, or 1.1%, to 4389.74. And in London, the


was down 75.9, or 1.2%, to 6457.2.

Wednesday's Wake-Up Watchlist


Brian Louis

Staff Reporter

  • Comcast (CMCSA) - Get Free Report and AT&T (T) - Get Free Report agreed to swap about 2 million cable subscribers, clearing the path for AT&T to take over MediaOneundefined. In March, Comcast agreed to buy MediaOne, but those plans went out the window recently when AT&T stepped in with an unsolicited $54 billion bid. AT&T's offer was higher than Comcast's. MediaOne accepted AT&T's offer, calling it a "superior proposal." In other news (earnings estimates from First Call):
  • Boeing (BA) - Get Free Report said it got a $650 million contract from the Navy.
  • Fox Entertainment Group (FOX) - Get Free Report reported fiscal third-quarter earnings of a penny a share, in line with the seven-analyst estimate and down from the year-ago 14 cents.
  • Humana (HUM) - Get Free Report reported first-quarter operating earnings of 20 cents a share, missing the 14-analyst estimate by 2 cents and down from the year-ago 30 cents. Last month, the company warned it expected first-quarter earnings to be between 20 cents to 24 cents. At that time, Wall Street was expecting Humana to earn 34 cents a share in the quarter.
  • Legg Mason (LM) - Get Free Report reported fiscal fourth-quarter earnings of 45 cents a share, beating the three-analyst estimate by 2 cents and up from the year-ago 40 cents.
  • Merrill Lynch upgraded Morgan Stanley Dean Witterundefined to near-term accumulate from near-term neutral.
  • National Semiconductor (NSM) said it is getting out of the personal computer processor business and it intends to sell a majority interest in its South Portland, Maine, wafer fabrication plant. The company also said it is cutting 550 jobs via early retirement, attrition and layoffs, including 165 job cuts in Singapore announced in April.
  • Newbridge Networks (NN) warned that fiscal fourth-quarter earnings will come in around 12 cents to 14 cents a share. The 15-analyst forecast called for earnings of 21 cents vs. the year-ago 12 cents.
  • News Corp. (NWS) - Get Free Report posted operating earnings of 17 cents an American depositary receipt in its fiscal third quarter, beating the eight-analyst estimate by a penny, but down from the year-ago operating earnings of 32 cents per ADR.
  • priceline.comundefined reported a first-quarter loss of 12 cents a share, a penny narrower than the five-analyst outlook.
  • Suiza Foodsundefined posted first-quarter earnings of 60 cents a share, beating the 10-analyst estimate by 2 cents and above the year-ago 54 cents, which excludes a loss.
  • Trigon Healthcare (TGH) - Get Free Report reported first-quarter earnings of 43 cents a share, excluding an item, beating the 11-analyst estimate by a penny and up from the year-ago earnings of 35 cents, excluding an item.