Wall St falls, led lower by high dividend-paying shares

By Caroline Valetkevitch

NEW YORK (Reuters) - U.S. stocks retreated from record levels on Wednesday, led lower by high-yielding dividend stocks as investors speculated on when the U.S. Federal Reserve might begin easing its stimulus of the economy.

Consumer staples, healthcare, telecommunications and utilities shares, S&P 500 sectors that include many high dividend-paying stocks, were all down more than 1 percent. Shares of Johnson & Johnson , down 2.1 percent at $85.78, led declines on the index.

"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 defensive sectors have led gains as investors favored high-dividend stocks over fixed-income securities in a low interest rate environment.

Benchmark Treasury yields, which hit 2.235 percent, the highest in more than a year, gained after Fed Chairman Ben Bernanke said last week the U.S. central bank may slow its bond-buying program if data shows the economy is getting stronger.

Fannie Mae and Freddie Mac each were down more than 30 percent in heavy volume, reversing sharp early gains. Shares of Fannie Mae were last down 30.6 percent at $2.83, while shares of Freddie Mac were last down 30.9 percent at $2.60.

Fund manager Bruce Berkowitz's Fairholme Capital Management is making a big bet on preferred shares of Fannie Mae and Freddie Mac, CNBC reported. Until Wednesday's pullback, shares of the companies had risen for seven straight days.

The Dow Jones industrial average <.DJI> was down 93.12 points, or 0.60 percent, at 15,316.27. The Standard & Poor's 500 Index <.SPX> was down 9.33 points, or 0.56 percent, at 1,650.73. The Nasdaq Composite Index <.IXIC> was down 14.71 points, or 0.42 percent, at 3,474.18.

The S&P telecoms sector index <.SPLRCL> lost 1.3 percent and utilities sector index <.SPLRCU> fell 1.4 percent.

Loose monetary policies by central banks around the world have lifted equity markets, with the S&P 500 up more than 15 percent this year. On Tuesday, stocks soared and the Dow closed at a record high after the Bank of Japan and European Central Bank reassured investors that policies designed to boost economic growth would stay in place.

Any change to the stimulus program may prompt a round of profit taking.

In company news, Smithfield Foods surged 29.3 percent to $33.58 after China's Shuanghui Group agreed to buy the company for $34 a share.

( For Insider coverage, see: http://reut.rs/13PRiqi )

SLM Corp rose 2 percent to $23.44 after the student loan provider said it would split the company into two publicly traded entities and named John Remondi its chief executive officer.

Trina Solar Ltd slumped 11 percent to $6.06 after reporting its seventh straight quarterly loss.

(Additional reporting by Angela Moon; Editing by Bernadette Baum, Nick Zieminski and Kenneth Barry)