For the week, the Dow fell 0.9% and the S&P 500 dropped 1.1%. In each case, the loss was the first for the index since the week ended Aug. 1. On the heels of stocks’ run to recent highs, many investors say U.S. companies’ shares are appropriately valued and due for a pullback. Moreover, some say stocks could see choppy trading if the Federal Reserve raises interest rates sooner than expected, reversing an accommodative stance widely believed to have added fuel to stocks’ rally in recent years.
A two-day meeting of the Fed’s policy-setting committee is scheduled to wrap up Wednesday, followed by a news conference by Fed Chairwoman Janet Yellen, offering money managers their next glimpse into the central bank’s plans. “We sense a lot of investor nervousness and we’ve been taking a little risk off the table,” said Alan Gayle, director of asset allocation at RidgeWorth Investments, which oversees about $50 billion. Anxiety about interest rates fueled selling in bonds, pushing the yield on the 10-year U.S. Treasury note up to 2.612%. Bond yields rise as prices fall.
Likewise, stocks seen as particularly vulnerable to rising interest rates underperformed on Friday. The MSCI U.S. REIT index dropped 3.2%. “Everyone’s fearing interest rates going up and reality is starting to set in,” said Wayne Lin, a portfolio manager at QS Investors, which oversees about $20.5 billion. Still, he has maintained a bullish positioning on U.S. stocks in part because he sees the risks for losses in bonds as higher.
On the economic front, August retail sales rose 0.6% from July, the Commerce Department reported Friday, just shy of the 0.7% median forecast of economists in a Wall Street Journal poll. Separately, import prices fell 0.9% in August from July, in line with expectations.
Elsewhere in global markets, crude-oil futures dipped 0.6% to settle at $92.27 a barrel. Gold futures fell 0.6% to $1,231.00 an ounce. In Asia, Hong Kong stock prices fell for a sixth session, the longest string of losses in more than two years. European stocks swung between slim gains and losses, as investors continued to weigh the prospects of Scottish independence. The Stoxx Europe 600 Index ended unchanged on the session.
In the corporate arena, shares of Conversant rallied 30% after the digital marketing company agreed to be acquired by Alliance Data Systems, ADS +1.99% a provider of marketing services such as private-label credit cards. Alliance Data’s shares rose 2%. Health Care REIT HCN -4.87% dropped 4.9% after selling $988 million of stock.