Dow slips to worst week of 2013
NEW YORK – Stocks fell Friday, closing out what was the worst week of the year for the Dow Jones industrial average.
The market was dragged lower by a weak performance from retailers and companies sensitive to higher interest rates. Homebuilders and banking stocks were among the best performers.
The possibility of a cutback in the Federal Reserve’s massive bond-buying program in September has roiled the bond market, which has spilled over into stocks. The yield on the benchmark U.S. 10-year Treasury note rose to 2.83 percent, its highest level since July 2011. A week ago, the yield was 2.58 percent.
“When yields are going up like this, that’s scary for most equity investors,” said Brian Reynolds, chief market strategist at Rosenblatt Securities.
Rising bond yields have a direct impact on the cost of borrowing for everyone – from homeowners trying to refinance their mortgages to companies trying to sell debt – making them a potential long-term drag on the economy. The Federal Reserve bond-buying programs were designed to keep the cost of borrowing as low as possible.
Shares of utilities and telecommunications companies, which typically perform poorly in a higher interest-rate environment, closed broadly lower. New York-based utility Consolidated Edison Inc. fell 75 cents, or 1.3 percent, to $56.64 while California’s PG&E was down 71 cents, or 1.6 percent, to $42.64. Verizon Communications Inc. and AT&T Inc. fell 1.7 percent and 0.5 percent, respectively.
The Dow has fallen 3.7 percent from its all-time high of 15,658.36 two weeks ago. Even so, the blue-chip index is up 15 percent this year while the S&P 500 has climbed 16 percent.
“Keep it in perspective – we’re down modestly from what was an all-time high,” Fox said.
With the bond market declining and stocks selling off, investors shifted into a safer asset – gold. Its price rose $10.1, or 0.7 percent, to $1,371. Gold had its third-best week this year, rising 3.7 percent.
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