Stocks such as utilities, pharmaceuticals and telecommunications are often purchased because they provide a higher-than-normal dividend. As Treasury yields rise, it makes all dividend-paying stocks less attractive to investors because Treasuries can provide a similar return with significantly less risk.
“You try to focus on stocks that usually benefit from higher interest rates -- banks are a good example,” said John Fox, who oversees $873 million in assets as co-manager of the FAM Value Fund.
The Dow has fallen 3.7 percent from its all-time high of 15,658.36 two weeks ago. Even so, the blue-chip index is up 15 percent this year while the S&P 500 has climbed 16 percent.
“Keep it in perspective — we’re down modestly from what was an all-time high,” Fox said.
Retailers continued their multi-day selloff. Nordstrom Inc. gave a bleak sales outlook late Thursday that echoed similar forecasts from Wal-Mart Stores Inc. and Macy’s Inc. earlier this week. The outlooks have raised worries that U.S. shoppers might be pulling back on spending.
Nordstrom’s stock fell $2.90, or 4.9 percent, to $56.43, making it the biggest decliner in the S&P 500.
The retail industry is a closely-watched part of the U.S. economy as consumer spending makes up roughly 70 percent of economic activity. The disappointing outlooks are worrisome because they take into account the back-to-school shopping season, typically the second-biggest shopping period for U.S. retailers.
“It’s left us scratching our heads,” Fox said. “It really forces you to ask the question: ‘is the consumer slowing down?’”
Investors have also been concerned about what will happen to the stock market — and the U.S. economy — if the Fed begins winding down its $85 billion-a-month bond-buying program in September. Some investors think that the Fed’s program has been a large contributor to the stock market’s record run.