Published: Thursday May 30, 2013 MYT 7:49:00 AM

US stocks fall as bond yields hit high

dividend stocks
NEW YORK: Stocks fell on Wednesday as high-yielding dividend stocks lost some of their luster
after recent gains in U.S. Treasury bond yields.
Benchmark Treasury yields overnight hit 2.235 percent - the highest in more than a year - and have
risen since last week when Federal Reserve Chairman Ben Bernanke raised fears that the Fed
would curb its bond-buying program sooner than most people expected.
Indexes made up of consumer staples, health care, telecommunications and utilities shares - S&P
500 sectors that include many stocks that pay high dividends - all slid more than 1 percent. Johnson
& Johnson , down 2.2 percent at $85.65, was the biggest drag on the S&P 500.
"The recent rise in interest rates on the 10-year bond over the past few sessions has finally caught
up with some of this year's market leaders," said Michael Sheldon, chief market strategist for RDM
Financial in Westport, Connecticut, adding that investors were cashing in profits.
The defensive sectors have led the gains in this year's market rally as investors favored highdividend stocks over fixed-income securities in a low interest-rate environment.
The spread between the S&P 500 dividend yield and the 10-year U.S. Treasury note's yield is at its
narrowest in about a year. The S&P 500 dividend yield was about 2.39 percent near Wednesday's
close.
Shares of Fannie Mae and Freddie Mac dropped sharply in heavy volume, reversing sharp early
gains. Shares of Fannie Mae plunged 28.9 percent to $2.90, with about 272 billion shares traded,
while shares of Freddie Mac sank 30.4 percent to $2.61, with 119 billion shares traded.
Fund manager Bruce Berkowitz's Fairholme Capital Management is making a big bet on preferred
shares of Fannie Mae and Freddie Mac, CNBC reported. Until Wednesday's pullback, Fannie Mae's
and Freddie Mac's shares had risen for seven straight days.
The Dow Jones industrial average slid 106.59 points, or 0.69 percent, to close at 15,302.80.
The Standard & Poor's 500 Index dropped 11.70 points, or 0.70 percent, to finish at 1,648.36.
The Nasdaq Composite Index fell 21.37 points, or 0.61 percent, to end at 3,467.52.
Volume was roughly 6.7 billion shares traded on the New York Stock Exchange, the Nasdaq
and the NYSE MKT, slightly above the average daily closing volume of about 6.4 billion this
year.

Decliners outpaced advancers on the NYSE by a ratio of nearly 4 to 1. On the Nasdaq, about
17 stocks fell for every eight that rose.
Both the S&P telecoms sector index <.SPLRCL> and the S&P utilities sector index <.SPLRCU> fell
1.5 percent. The S&P consumer staples index <.SPLRCS> tumbled 1.9 percent while the S&P
health care index <.SPXHC> declined 1.5 percent.
At the same time, the iShares Barclays 20+ Year Treasury Bond exchange-traded fund added 1.1
percent, bouncing back from a drop of 2.6 percent on Tuesday.
Loose monetary policies by central banks around the world have lifted stock markets, driving both
the Dow and the S&P 500 to record highs this year.
The S&P 500 is up 15.6 percent from its close at the end of 2012.
Among the day's gainers, Smithfield Foods surged 28.4 percent to $33.35 after China's Shuanghui
Group agreed to buy the company for $34 a share.
SLM Corp rose 2.2 percent to $23.48 after the student loan provider said it would split the company
into two publicly traded entities. The company named John Remondi as its chief executive officer. Reuters

http://biz.thestar.com.my/news/story.asp?
file=/2013/5/30/business/20130530075045&sec=business#13699100337763394&if
_height=507