MarketView for May 29

Summary

Stocks fell on Wednesday as high-yielding dividend stocks lost some of their luster after recent gains in U.S. Treasury bond yields. Benchmark Treasury yields overnight hit 2.235 percent - the highest in more than a year - and have risen since last week when Federal Reserve Chairman Ben Bernanke raised fears that the Fed would curb its bond-buying program sooner than most people expected.

Indexes made up of consumer staples, health care, telecommunications and utilities shares - S&P 500 sectors that include many stocks that pay high dividends - all slid more than 1 percent. Johnson & Johnson was down 2.2 percent to close at $85.65, making it the largest drag on the S&P 500.

The defensive sectors have led the gains in this year's market rally as investors favored high-dividend stocks over fixed-income securities in a low interest-rate environment. The spread between the S&P 500 dividend yield and the 10-year U.S. Treasury note's yield is at its narrowest in about a year. The S&P 500 dividend yield was about 2.39 percent near Wednesday's close.

Shares of Fannie Mae and Freddie Mac fell sharply in heavy volume, reversing sharp early gains. Shares of Fannie Mae were down 28.9 percent to $2.90, with about 272 billion shares traded, while shares of Freddie Mac fell 30.4 percent to close at $2.61, with 119 billion shares traded. Until Wednesday's pullback, Fannie Mae's and Freddie Mac's shares had risen for seven straight days.

Both the S&P telecoms sector index and the S&P utilities sector index fell 1.5 percent. The S&P consumer staples index was down 1.9 percent while the S&P health care index fell 1.5 percent. At the same time, the iShares Barclays 20+ Year Treasury Bond exchange-traded fund added 1.1 percent, bouncing back from a drop of 2.6 percent on Tuesday.

Loose monetary policies by central banks around the world have lifted stock markets, driving both the Dow and the S&P 500 to record highs this year. The S&P 500 is up 15.6 percent from its close at the end of 2012.

Among the day's gainers, Smithfield Foods was up 28.4 percent to $33.35 after China's Shuanghui Group agreed to buy the company for $34 a share.

SLM Corp rose 2.2 percent to $23.48 after the student loan provider said it would split the company into two publicly traded entities.

Approximately 6.7 billion shares changed hands on the three major equity exchanges, slightly above the average daily closing volume of about 6.4 billion shares this year.