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Stock market falls in afternoon trading

NEW YORK (AP) — The stock market edged lower Friday afternoon, hurt by weak performances from retailers.

The Standard & Poor's 500 index was down six points, or 0.4 percent, to 1,654 at 1:14 p.m. Eastern Daylight Times. The Dow Jones industrial average fell 38 points, or 0.2 percent, to 15,077. The Nasdaq composite eased one point, or 0.04 percent, to 3,604.

Shares of Nordstrom Inc, Macy's Inc. and J.C. Penney Co. fell because of worries that U.S. shoppers might be pulling back on spending. A bleak outlook from Nordstrom late Thursday followed similar forecasts from Wal-Mart and Macy's earlier this week. Nordstrom shares fell $2.13, or 3.6 percent, to $57.20, making it the second-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 especially worrisome because they come during the back-to-school shopping season, typically the second-biggest shopping period for U.S. retailers.

"It's left us scratching our heads," said John Fox, who oversees $873 million in assets as co-manager of the FAM Value Fund. "It really forces you to ask the question: 'is the consumer slowing down?'"

The benchmark U.S. 10-year Treasury note rose to 2.85 percent, its highest level since July 2011. Late Thursday, the yield was 2.77 percent. Interest rates have been climbing sharply for the last two weeks as investors anticipate that the Federal Reserve will cut back on its big bond-buying program as early as September

Banks, which typically benefit from higher interest rates, held on to gains from earlier in the day. The stock of Bank of America Corp. rose 6 cents, or 0.4 percent, to $14.39. JPMorgan Chase & Co. was up 7 cents, or 0.1 percent, to $53.36..

"You try to focus on stocks that usually benefit from higher interest rates. Banks are a good example," said Fox.

Also in focus were homebuilders following a Commerce Department report that new home construction was up 6 percent in July to a seasonally-adjusted rate of 896,000. That figure was below economists' consensus forecast of 903,000, however.

Shares of PulteGroup Inc., and Lennar Corp. were up 2 percent.

Housing has been one of the bright spots of the U.S. economy for the last several months. In June, home builders sought the most building permits for single-family homes in five years. New-home sales jumped in June to their highest level in five years as well.

The last few weeks, investors have been concerned about what will happen to the stock market — and the U.S. economy — once the Fed begins winding down its $85 billion-a-month bond-buying program. Some investors think that the Fed's program has been a large contributor to the stock market's record run.

"The big question is will the Fed eliminate the bond-buying program in September and, if so, how they will they remove the bond buying," said Frank Davis, director of sales and trading for LEK Securities.

The Dow has dropped more than 300 points, or roughly 3 percent, this week. The S&P 500, which is a broader gauge of the market, is down almost 40 points, or 2 percent. The market is on pace for its third-worst week this year.

In other news, personal computer maker Dell Inc. reported a 72-percent drop in its fiscal second-quarter earnings. That may help convince Dell shareholders to approve the $24.8 billion buyout proposed by founder Michael Dell. and private-equity firm Silver Lake.

Shares of Dell rose 5 cents, or 0.5 percent, to $13.77 — below the proposed buyout price of $13.88 per share.

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