Benchmark Treasury yields overnight hit 2.235 per cent – 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 per cent 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 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 per cent near yesterday’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 per cent to $2.90, with about 272bn shares traded, while shares of Freddie Mac sank 30.4 percent to $2.61, with 119bn shares traded.
The Dow Jones industrial average slid 106.59 points, or 0.69 per cent, to close at 15,302.80. The Standard & Poor’s 500 Index dropped 11.70 points, or 0.70 per cent, to finish at 1,648.36. The Nasdaq Composite Index fell 21.37 points, or 0.61 per cent, to end at 3,467.52.