MARKET SNAPSHOT: U.S. Stocks Drop As Traders Eye Rising Yields

By William L. Watts, MarketWatch

NEW YORK (MarketWatch) -- U.S. stocks opened mostly lower Monday, as investors watched Treasury yields continue to push higher on expectations the Federal Reserve will move in coming months to curtail the amount of monetary stimulus it provides to the economy.

The Dow Jones Industrial Average (DJI) fell 15.8 points, or 0.1%, to 15,065.67, while the S&P 500 (SPX) declined 1.22 points, or 0.1%, to 1,654.61. The Nasdaq Composite (RIXF) bucked weakness elsewhere to rise 8.2 points to 3,610.98.

"Wall Street hates uncertainty, and right now discerning the appropriate yield on the 10-year Treasury note is resulting in an awful lot of uncertainty," said Sam Stovall, chief equity strategist at S&P Capital IQ, in a note to clients.

Treasury yields continued to push higher, exploring territory last seen in July 2011. The yield on the 10-year Treasury note (10_YEAR) rose 4 basis points, or 0.04 percentage point, to 2.87%.

Rising yields can undercut stocks due to fears that higher borrowing costs will slow economic activity. Yields have been on the rise since this spring, when Federal Reserve Chairman Ben Bernanke indicated the Fed could begin scaling back its $85 billion-a-month bond buying plan later this year.

While stocks recovered from a June pullback fueled by concerns over the Fed's plans, markets stumbled last week as the 10-year yield rose to two-year highs.

With no major economic data set for release Monday, investors are looking ahead to the release Wednesday of the minutes of the latest meeting of Fed policy makers, as well as the Kansas City Federal Reserve's annual retreat in Jackson Hole, Wyo., at the end of the week.

Bernanke, however, won't be attending the Jackson Hole conference, likely undercutting its influence.

"With U.S. private-sector investors barely buying any longer-dated Treasurys in recent years, the market is nervous about how high yields have to be to lure them in," wrote Kit Juckes, currency strategist at Société Générale in London. "On a day with no data in a week with Jackson Hole as the main focus, nerves are jangling and a yield overshoot possible."

J.P. Morgan Chase & Co. (JPM) was the Dow's top decliner, losing 1.4%. News reports said U.S. regulators are looking into the bank's hiring practices in China.

Shares of Cliffs Natural Resources Inc. (CLF) dropped 3.6%, making it the biggest loser in the S&P 500. The decline comes after a nearly 4% drop on Friday.

Dollar General Corp. (DG) topped S&P 500 gainers with a 2.3% rise.

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