U.S. Stocks Ease on Rate Worries


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U.S. stocks eased Monday, one session after an upbeat May jobs report bolstered expectations for higher interest rates later this year.

The Dow Jones Industrial Average fell 36 points, or 0.2%, to 17813 in midday trading. The S&P 500 index lost seven points, or 0.3%, to 2086. The Nasdaq Composite Index fell 23 points, or 0.4%, to 5046.

The declines follow three consecutive weeks of losses for the Dow industrials through Friday, while the S&P and Nasdaq have notched two straight weeks of declines. The pullback has left the blue-chip index 2.5% below its May 19 record close of 18312.39, as investors considered mixed economic readings and what it means for an eventual increase in U.S. interest rates.

Among investors’ worries is the likely liftoff in interest rates. The robust May jobs report, released Friday, bolstered expectations the Federal Reserve will begin raising short-term rates later this year. The report sparked a selloff in the bond market that sent the yield on the 10-year Treasury to its highest level in eight months on Friday.

But major stock benchmarks are still not far from record highs reached just last month, and many investors remain content to sit on their existing portfolios for now, traders said.

“Eyes are on the bond market, eyes are on Greece, eyes are on any potential [merger] activity. Otherwise there’s not a heck of a lot” moving stocks, said Dan McMahon, director of institutional equity trading at Raymond James in New York. “Volume has been fairly anemic.”

With rates set to rise, possibly in September, and stock valuations looking elevated, investors are taking a pause, said Art Hogan, chief market strategist at Wunderlich Securities.

“Investors have been cautious about bidding up stocks in an environment where we could see our first rate rise in years,” said Mr. Hogan.

The S&P 500 is trading at roughly 18 times the last 12 months of earnings, higher than its 10-year average of 15.8, according to FactSet.

Stocks ended mostly lower Friday, capping a volatile week with losses. The Dow fell 0.3% to 17849.46 on Friday and the S&P lost 0.1% to 2092.83. The Nasdaq Composite rose 0.2% to 5068.46. The decline followed a report that showed U.S. employers added 280,000 last month, a bigger-than-expected increase that signals a rebound in economic growth after a bumpy start to the second quarter.

No major economic reports are due Monday. On Thursday, investors will get an update on retail sales data for May, with economists expecting an increase of 1.3%. On Friday, the Labor Department will release its May producer-price index, a gauge of U.S. business prices, set to show a rise of 0.4%.

European stocks were mostly lower Monday, adding to the negative tone. France’s CAC 40 fell 1% and Germany’s DAX lost 1%. The DAX has officially crossed into a so-called correction, falling roughly 10% since its mid-April record.

The yield on the 10-year Treasury note fell to 2.378% on Monday from 2.402% on Friday. Yields fall as prices rise.

In commodity markets, gold futures advanced 0.4% to $1172.90 an ounce. Crude-oil futures declined 1% to $58.50 a barrel.

In corporate news, Deutsche Bank AG shares rose 3.6% after the bank’s co-chief executives announced their resignations on Sunday.

Shares of Sears Holdings Corp. fell 3.4% after the retailer said sales continued to fall in the first quarter, though profitability improved.

Stifel Financial Corp. shares gained 1.1% after the financial firm agreed to acquire Barclays PLC’s U.S. wealth and investment management unit.




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