suntimes
DRAFTY 
Weather Updates

Stocks fall; Dow average pulls back from a record

Stocks fell Wall Street Wednesday as investors assessed whether rally thhas pushed stocks record levels this year has run its

Stocks fell on Wall Street Wednesday as investors assessed whether a rally that has pushed stocks to record levels this year has run its course. | AP file photo

storyidforme: 49958128
tmspicid: 18628061
fileheaderid: 8376917

Updated: May 29, 2013 5:49PM



NEW YORK (AP) — The stock market fell Wednesday, giving back much of its gain from the day before, as traders cut their holdings of high-dividend stocks that were investor favorites at the beginning of the year.

Rising bond yields have been an important factor behind that shift.

The yield on the 10-year Treasury note is near the highest it’s been in 13 months following a sharp increase on Tuesday. That’s giving investors who want steady income an alternative to dividend-rich stocks like power utilities, consumer staples makers and phone companies. Investors piled into those stocks at the beginning of the year, when bond yields were close to their historic lows.

More broadly, after this year’s powerful bull run — the Dow Jones industrial average is up 17 percent, the Standard & Poor’s 500 index 16 percent — investors may be running out of reasons to keep plowing money into the stock market. The S&P 500 is headed for a seventh consecutive month of increases, the longest winning streak since 2009. The Dow is on track to end higher for a sixth straight month.

“There’s a vacuum of catalysts to continue to push (stocks) higher,” said Sam Stovall, chief U.S. equity strategist for S&P Capital IQ. Now, Stovall said, investors are wondering: “ ‘Well, should I take some profits and sit on the sidelines and then get back in?’ “

Stovall noted that S&P 500 has had a temporary pullback of at least 5 percent every year since the end of the World War II. That hasn’t happened yet in 2013.

Investors have been encouraged by positive signs on the economy recently, including sharp increases reported Tuesday in home prices and consumer confidence, but they are also concerned that the Federal Reserve will start to ease back on its stimulus program as the economy improves.

The Fed has been buying $85 billion of bonds each month in an effort to keep interest rates low and encourage borrowing, lending and investing. That stimulus has also been a major factor supporting the rally in the stock market as investors seek alternatives to bonds.

Worries that the Fed could slow down its bond purchases contributed to a rare weekly loss for the stock market last week, the first in a month. Those concerns have also led traders to sell bonds, pushing long-term interest rates higher.

The Dow was down 98 points at 15,310 as of 3:10 p.m. Eastern Daylight Time Wednesday, a loss of 0.6 percent. That erased much of its 106-point advance the day before, when it closed at a record high. The Dow was down as much as 179 points in late morning trading, then rose moderately in the afternoon.

The S&P 500 index was down 10 points to 1,650, or 0.6 percent. The Nasdaq composite lost 18 points to 3,471, or 0.5 percent.

Despite the decline, it’s too early to call an end to the rally. On several trading days this year, stocks have had sharp sell-offs, only to rise again as investors take advantage of the dip in prices to get into the market.

The Dow fell 1.8 percent April 15 on concerns that a slowdown in China would trip up global economic growth. It has risen 5.5 percent since then. The index also slid 1.6 percent Feb. 25 on concerns that the European debt crisis would disrupt global markets again. The Dow shook off that loss too, and is up 11 percent since then.

The yield on the 10-year Treasury note edged down to 2.15 percent from 2.17 percent late Tuesday. The yield surged Tuesday to its highest level in 13 months as investors moved money out of bonds. The yield has risen sharply from 1.63 percent at the beginning of the month.

As yields have risen in May investors have sold stocks that pay high dividends, like consumer staples makers and utilities. Those groups, which many traders seeking income bought as an alternative to bonds, had the biggest declines Wednesday, 1.7 percent for consumer staples and 1.4 percent for utilities. In the first three months of the year they were among the biggest winners.

In commodities trading, the price of crude oil fell $1.88, or 2 percent, to $93.13. Gold rose $12.40, or 0.9 percent, to $1,391.30 an ounce. The dollar fell against the euro and the Japanese yen.

Among stocks making big moves:

— Smithfield Foods surged $7.62, or 29 percent, to $33.59 after the company agreed to be acquired by meat processor Shuanghui International Holdings for approximately $4.72 billion.

— Stewart Enterprises rose $3.28, or 33 percent, to $13.01 after the funeral company agreed to be acquired by Service Corp International for $1.1 billion in cash.

— Sallie Mae jumped $1.04, or 4.4 percent, to $24, the biggest gain in the S&P 500 index. The company, which is formally named SLM Corp., announced a plan to split into two separate companies, one that manages student loans and a consumer banking business.

— Michael Kors Holdings rose $1.62 cents, or 2.6 percent, to $63.60 after the fashion company reported that its profit more than doubled on surging sales in the fourth quarter, capping another strong year for the upscale handbag maker.



© 2014 Sun-Times Media, LLC. All rights reserved. This material may not be copied or distributed without permission. For more information about reprints and permissions, visit www.suntimesreprints.com. To order a reprint of this article, click here.