Photographer: Michael Nagle/Bloomberg

S&P 500 Rally Pauses as Tumbling Bond, Oil Prices Break Momentum

  • Energy shares lower as commodities slip for fourth week
  • Utilities and real estate companies fall as bond yields jump

U.S. equities ended their longest streak of weekly gains in more than a year as slumping oil prices dragged down energy stocks and a selloff in bonds weighed on companies that benefit from investors seeking regular income.

Signs of strong growth in the economy weren’t enough to propel stocks higher this week as investors weighed the impact of a potential interest-rate increase by the Federal Reserve next Wednesday. Futures traders now see a hike as a sure thing. With the first-quarter earnings season almost over, stocks lost the boost provided by profits that on average beat Wall Street expectations.

The S&P 500 slipped 0.4 percent to 2,372.60 in its first weekly decline since the period ended Jan. 20. The Dow Jones industrial average lost 0.5 percent to 20,902.98. Small-cap stocks in the Russell 2000 Index declined for the third straight week, falling 2.1 percent for the biggest drop this year.

“This market is now facing its biggest challenge,” Yousef Abbasi, global market strategist at Jonestrading Institutional Services LLC in New York, said in a note to clients. “The most substantial fly in the ointment is the break-down in crude this market is experiencing. For most of this year, we’ve managed to ignore rising inventories for crude and refined products while speculators were record long.”

Oil posted its worst weekly decline since November as a Bloomberg Commodity Index dropped 3.4 percent for its fourth straight weekly loss. Energy companies slid 2.6 percent as nine of the 11 main industry groups in the S&P 500 retreated.

At the same time, losses accumulated in stocks that investors seek out in low-yielding environments as high dividend-paying companies like real estate and utility shares lost at least 1.2 percent. The 10-year Treasury yield rose 10 basis points to 2.57 percent.

Technology and health-care stocks were the only groups to end the week higher. Tech shares, which posted the second-biggest year-over-year jump in revenue growth this past quarter, were led by gains of at least 3.9 percent in Qualcomm Inc. and Activision Blizzard Inc.