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US stocks up slightly as banks, homebuilders rise

Ken Sweet, AP Markets Writer

Trader Jonathan Corpina, left, and specialist Michael McDonnell work on the floor of the New York Stock Exchange Friday, Aug. 16, 2013. Stocks bounced back Friday from consecutive days of significant declines, with more evidence of a rebounding U.S. housing market.(AP Photo/Richard Drew)

NEW YORK (AP) -- The stock market was mostly lower in early afternoon trade Friday, as weak performances from retailers offset gains in banks and homebuilders.

The Standard & Poor's 500 index edged 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.

Banks, which typically benefit from higher interest rates, were among the best-performers. 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.

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.

"You try to focus on stocks that usually benefit from higher interest rates. Banks are a good example," said John Fox, who oversees $873 million in assets as co-manager of the FAM Value Fund.

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.

On top of the concerns about the Fed, disappointing news out of the retail sector has lowered investor confidence this week.

A bleak outlook from Nordstrom late Thursday followed similar forecasts from Wal-Mart Stores and Macy's Inc. earlier this week. Nordstrom shares fell $2.13, or 3.6 percent, to $57.20.

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," Fox said. "It really forces you to ask the question: 'is the consumer slowing down?'."

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.