Stocks Fall amid Interest Rates Worries

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Stocks Fall amid Interest Rates Worries

The stock market has had its first week of loss since August due to the possibility of an increase in interest rates.

On Friday, the Standard &Poor 500 Index dropped 0.6% or 11.91 points to end at 1,985.54. The index dropped 1.1% during the week.

CBS News reported that utility companies and stocks paying high dividends led the declines. The stocks have been favored this year amid investors hinting for alternative sources of income due to low bond yields.

Since the yield on the Treasury note has risen to 2.61%, the highest in two months, investors are not willing to hold risky stocks. With the report on Friday showing that retail sales rose faster than economists expected in August, there have been expectations that interest rates might be increased earlier than expected by the Federal Reserve.

Prudential Financial market strategist, Quincy Krosby said, “As the economic data continues to move alone this positive trajectory, interest rates are going to rise. The market is going to have to accept that.”

According to Daily Finance, other stock indexes declined on Friday. The Dow Jones Industrial Average dropped 0.4% or 61.49 points to 16,987.51 and the Nasdaq Composite declined 0.5% or 24.21 points to 4,567.60.

Charles Schwab trading strategist, Randy Frederick said that the investors need not jump the gun amid concerns that increasing interest rates will end the bull run of five years for the stock market provided there is improvement in the economy then the stocks can continue rising.

Frederick said, “Generally, the market goes through a correction and then the bull market continues.”

Utility stocks dropped 1.8%, the largest drop among the 10 sectors of the S&P 500. Phone company stocks dropped 1.2% and energy stocks declined 1.5%.

Oil price dropped amid concerns of failing global demand and increasing supply. US benchmark crude dropped 52 cents closing at $92.27 per barrel.

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To contact the reporter of the story: Jonathan Millet at john@forexminute.com