By Kate Gibson and Victor Reklaitis, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks declined on Friday,
handing the Dow Jones Industrial Average its worst week this year,
with investors on uncertain footing as longer-term Treasury yields
rose to two-year highs.
The Dow(DJI) slid 30.72 points, or 0.2%, to finish at 15,081.47,
while the S&P 500 index (SPX) fell 5.49 points, or 0.3%, to
close at 1,655.83.
The Nasdaq Composite (RIXF) shed 3.34 points, or 0.1%, to end at
3,602.78.
For the week, the Dow lost 344 points, or 2.2%, suffering its
biggest weekly percentage drop and point loss of 2013. It was the
blue-chip index's worst weekly percentage slide since May 2012, and
its largest point decline since June 2012.
The S&P 500 slumped nearly 36 points, or 2.10%, for the
week, suffering its biggest weekly point drop of the year, but not
its biggest percentage decline. The tech-heavy Nasdaq was down just
1.6% for the week, as Apple's(AAPL) 10.5% weekly gain provided a
boost.
All three main stock indexes lost ground for the second week in
a row.
"Stocks are taking their lead from the bond market. Higher
yields are not good news for stocks, but if higher yields come
because the economy is getting stronger," the latter would be
positive for equities, said Kate Warne, investment strategist at
Edward Jones.
While stock indexes traded in a limited range on Friday,
longer-term Treasury yields resumed their rapid climb, with the
10-year (10_YEAR) rising 5 basis points to 2.83%.
"Around lunchtime, the 10-year note got hit and the yield moved
above yesterday's high. If the yield would back off below 2.8%,
stock buyers would be a bit encouraged," Elliot Spar, market
strategist at Stifel Nicolaus & Co., emailed in afternoon
commentary.
Jerry Villella, a J.P. Morgan Private Bank investment specialist
based in Dallas, said that "real yields are moving up, and that's a
reflection of a healing economy. Steep yield curves do not precede
recessions."
He believes the recent and violent move in yields will moderate,
with the 10-year yield moving between 2.5% and 3% through the end
of the year. Villella also noted that stocks still are showing
sizable gains for 2013 to date.
"Even after a pullback from the last couple of days, we're still
up year to date, and just like 2012, it coincides with a weakly
growing economy. Two percent economic growth gave us 16% equity
appreciation last year," said Villella. The S&P 500 has gained
16% so far this year.
"Earnings-per-share growth is what counts," said Villella,
adding that 3% of that growth is coming from top-line, or sales
growth, none stems from margin expansion and 1% comes from a
shrinkage in shares outstanding due to corporate share
repurchases.
Gold prices rose $10.10, or 0.7%, to $1,371 an ounce, extending
a two-day rally in which it gained $40.40, or 3.1%. Up for six of
its past five sessions, the metal is up 4.5% for the week, 4.1% for
the month and down 19% for the year.
Oil prices rose slightly, finishing 1.4% higher for the week,
and the dollar edged higher against the currencies of major U.S.
trading partners.
Economic reports on Friday drew little reaction for Wall
Street.
The Commerce Department reported housing starts climbed at an
annual rate of 896,000, less than the 915,000 estimated.
"They were a bit weaker than expected, but I still think it's
overall good news, as they approached 900,000. I was disappointed
about single-family starts, which actually declined, and it is a
bit surprising. Based on recent permit data, I was hoping to see
more of an uptick on the single-family side," said Elizabeth
Ptacek, a senior credit real-estate analyst at KeyBank.
But Ptacek believes that difficulty in getting financing is more
of an issue for housing than higher interest rates: "Credit remains
very tight. It's easing, but not quickly enough for first-time home
buyers."
The Labor Department reported productivity rose at a slightly
better-than-estimated 0.9% annual rate in the second quarter. The
initial read of the University of Michigan/Thomson Reuters consumer
sentiment fell to 80.0 this month, down from 85.1 in July,
according to published reports.
Nordstrom Inc. (JWN) shares fell 4.9% a day after the high-end
retailer reported lower-than-expected sales and cut its full-year
forecast.
Aspen Technology Inc. (AZPN) shares jumped 7.9% after the maker
of software for process manufacturing posted higher-than-expected
sales and earnings for the fiscal fourth quarter.
Dell Inc.(DELL) posted adjusted earnings of 25 cents per share
-- a penny higher than analysts had predicted. Shares of the
personal-computer maker gained 0.8%.
Upbeat jobless-claims data on Thursday helped cement the view
that tapering of the Federal Reserve's bond-buying program will
happen in September. U.S. stocks sank for a second day, driven by
tapering fears, downbeat corporate news and a spike in Treasury
yields to 2011 highs.
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