Stocks slip amid interest rate worries

NEW YORK – The prospect of rising interest rates sent the stock market to its first weekly loss since early August.

The Standard & Poor’s 500 index fell 11.91 points, or 0.6 percent, to end at 1,985.54 on Friday. The index was down 1.1 percent for the week.

Declines were led by utility companies and other stocks that pay high dividends. Those stocks have been in favor this year as investors hunt for other sources of income because bond yields have been low.

Now that the yield on the ultrasafe 10-year Treasury note has shot to 2.61 percent – its highest level in two months – investors are less willing to hold riskier stocks, even those paying a rich dividend.

The recent rise in bond yields was bolstered Friday by a report showing that U.S. retail sales rose faster last month than economists forecast. That reinforced expectations that the Federal Reserve may start hiking interest rates sooner than expected. The central bank has nearly finished winding down its stimulus program and policymakers start a two-day meeting on Tuesday.

The yield on the 10-year Treasury note has now climbed for seven straight days.

“As the economic data continues to move along this positive trajectory, interest rates are going to rise,” said Quincy Krosby, a market strategist at Prudential Financial. “The market is going to have to accept that.”

Other stock indexes fell Friday. The Dow Jones industrial average lost 61.49 points, or 0.4 percent, to 16,987.51 The Nasdaq composite dropped 24.21 points, or 0.5 percent, to 4,567.60.

The yield on the 10-year Treasury note has risen from 2.34 percent at the start of the month and is trading at its highest level since early July.

Higher interest rates mean that companies and consumers have to pay more to borrow.

As long as the economy is improving, stocks can continue to move higher, said Randy Frederick, a managing director of trading and derivatives with the Schwab Center for Financial Research.