Stocks had a decent start in the first half of the week, but investors were hit hard in the past three days. Overall, the Dow retreated 2.2 percent for the week, its worst for 2013. The broader Standard & Poor’s 500-stock index lost 2.1 percent for the week, its second-worst performance of the year.
The possibility of a cutback in the Federal Reserve’s massive bond-buying program in September has roiled the bond market in the past couple of weeks, which in turn spilled over into the stock market. 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. In the bond market, yields rise as bond prices fall.
“When yields are going up like this, that’s scary for most equity investors,” said Brian Reynolds, chief market strategist at Rosenblatt Securities.
On Friday, the S&P 500 lost 5.49 points, or 0.3 percent, to 1655.83. The Dow fell 30.72 points, or 0.2 percent, to 15,081.47, and the Nasdaq composite lost 3.34 points, or 0.1 percent, to 3602.78.
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 fell 1.3 percent to $56.64, while California’s PG&E was down 1.6 percent to $42.64. Dow components Verizon Communications and AT&T fell 1.7 percent to $47.71 and 0.5 percent to $34.18, respectively.
Retailers continued their multi-day selloff. Nordstrom gave a bleak sales outlook late Thursday that echoed similar forecasts from Wal-Mart and Macy’s. The outlooks have raised worries that shoppers might be pulling back on spending. Nordstrom’s stock fell $2.90, or 4.9 percent, to $56.43, making it the biggest decliner in the S&P 500.
The retail industry is a closely watched part of the economy, as consumer spending makes up roughly 70 percent of economic activity. The disappointing outlooks are worrisome because they take into account the back-to-school shopping season, typically the second-biggest shopping period for U.S. retailers.
“It’s left us scratching our heads,” said John Fox, who oversees $873 million in assets as co-manager of the FAM Value Fund. “It really forces you to ask the question: ‘Is the consumer slowing down?’”
In other news, personal computer maker Dell reported a 72-percent drop in its fiscal second-quarter earnings. That may help convince Dell shareholders to approve the $24.8 billion buyout proposed by founder Michael Dell and private-equity firm Silver Lake. Shares of Dell rose 0.8 percent to $13.82 — below the proposed buyout price of $13.88 per share.