May 14 - Summary: Wall Street was turned upside down as bond yields tumbled to six-month lows with investors convinced the European Central Bank is preparing to cut rates, prompting stocks to roll back from records. Conway G. Gittens reports.
REFEEDING TO FIX ERROR. S&P 500 STOPPED AT A THREE-DAY RALLY, NOT TWO-DAY RALLY Retreat! Retreat! That was the mantra on Wall Street. The Dow broke five days of gains, the S&P 500 stopped at a three-day rally, and the Nasdaq was down for the fifth time in seven sessions. While the market overall is not far from record highs, Charlie Bilello, director of research at Pension Partners, says if you look deeper, the market is not as rosy at it appears. SOUNDBITE: CHARLIE BILELLO, DIRECTOR OF RESEARCH, PENSION PARTNERS (ENGLISH) SAYING: "We've had two consecutive months of small caps going down and large caps going up. So we think it's somewhat of a cautionary signal that people are rotating into more defensive large cap names here - out of small cap, higher growth names. Now you've seen high momentum stocks such as biotechs and social media stocks down 20, 30, even more percent than that. The broader indices are kind of masking underlying weakness." And the bond market is sending another troublesome signal. Yields on the 10-year note slumped to a six-month low. That's hardly a sign of confidence in what is supposed to be a growing global economy. The fall - sparked by signals the European Central Bank is preparing to lower interest rates. SOUNDBITE: CHARLIE BILELLO, DIRECTOR OF RESEARCH, PENSION PARTNERS (ENGLISH) SAYING: "You have all these forces that are overwhelming what the Federal Reserve and other central bankers in Europe and Japan are trying to do - they can't overcome these broader forces. And so that's the great risk that they won't be able to prevent the economy from going into a deflationary cycle." But there is just a whiff of inflation - at least in the U.S. Producer prices saw their biggest jump in a year and a half. Here's a quick run-down of corporate news: Quarterly revenues at Cisco falling less than anticipated and profits also not as bad as feared as the network equipment maker makes progress in its turnaround plan. Yahoo is buying Blink, a mobile messaging app that causes messages to disappear. It competes with Snapchat. The price was not disclosed. Google is making Google Glass available in its testing phase to anyone in the U.S. willing to plop down $1,500. Department store retailer Macy's beat profit targets but same-stores sales were weaker than forecast. Kate Spade posted a bigger-than-expected loss on much better-than-expected quarterly revenues. In Europe, stocks were little changed due to weakness in the media sector.