US stocks end rally

The rally in US stocks ended yesterday. Bloomberg reports:

U.S. stocks fell for the first time this week after Federal Reserve Chairman Ben S. Bernanke warned that a scarcity of credit will restrain economic growth and analysts said Intel Corp. may be hurt by slower computer sales...

The S&P 500 decreased 18.35 points, or 1.3 percent, to 1,348.86. The Dow Jones Industrial Average slid 175.26, or 1.4 percent, to 12,376.98. The Nasdaq Composite Index lost 41.39, or 1.7 percent, to 2,332.54. About five stocks declined for every one that rose on the New York Stock Exchange.

But the US economic data out yesterday weren't too bad. Bloomberg reports:

The U.S. trade deficit shrank more than forecast in December and showed the first annual drop since 2001 as the faltering economy eroded demand for imported autos and Chinese-made consumer goods.

The gap narrowed 6.9 percent from November to $58.8 billion, the Commerce Department said today in Washington. Imports fell 1.1 percent, while exports increased 1.5 percent, aided by stronger growth abroad...

A separate report from the Labor Department showed claims for unemployment benefits fell for a second week, while staying in a range consistent with a slowing job market.

Initial jobless claims decreased by 9,000 to 348,000 in the week ended Feb. 9, from 357,000 a week earlier. The four-week moving average of claims, a less volatile measure, rose to the highest level since October 2005.

Treasuries didn't generally benefit from the flight from stocks yesterday. From Bloomberg:

Treasury 10-year notes fell for a third straight day as Federal Reserve Chairman Ben S. Bernanke told Congress the central bank is ready to cut interest rates again, reinforcing concern inflation will accelerate.

The decline pushed 10-year yields to the highest level compared with two-year notes since July 2004 on signs credit markets remained strained...

Ten-year note yields rose 7 basis points, or 0.07 percentage point, to 3.81 percent at 4:22 p.m. in New York, according to bond broker Cantor Fitzgerald LP. They touched 3.86 percent, the highest since Jan. 11...

The yield on the 30-year bond rose 9 basis points to 4.64 percent after reaching 4.69 percent, the highest since Nov. 1. It's the biggest gain in a week. An increase in the price of two-year notes pushed the yield down 2 basis points to 1.89 percent. It touched 1.83 percent on Jan. 23, the lowest since April 2004...

Shorter-term Treasuries may be supported on indications of widening stress in credit markets, traders said.

Elsewhere, growth in Europe has cooled, Bloomberg reports.

Gross domestic product in the euro region rose 0.4 percent from the third quarter, when it increased 0.8 percent, the European Union's statistics office in Luxembourg said today. Economists expected growth of 0.3 percent, according to a Bloomberg News survey of economists. From a year earlier, the economy expanded 2.3 percent.

But in Japan, fourth quarter growth greatly exceeded expectations. AFP/CNA reports:

Japan's economy grew at a much faster than expected 3.7 percent annualised pace in the fourth quarter of 2007, helped by solid exports and business investment, official figures showed Thursday.

Quarter-on-quarter, gross domestic product (GDP) expanded by 0.9 percent, accelerating sharply from a revised growth rate of 0.3 percent in the three months to September, the Cabinet Office reported.