Stocks edge higher at midday, led by banks

Banks offset declines in retailers

Trader Jonathan Corpina, left, and specialist Michael McDonnell work on the floor of the New York Stock Exchange today.

NEW YORK — The stock market edged higher in midday trading today, led by strong performances from banks and homebuilders.

The gains offset broad declines in retailers such as Nordstrom Inc, Macy’s Inc. and J.C. Penney Co., which have been pummeled this week on worries that the U.S. shoppers might be pulling back on spending.

The Standard & Poor’s 500 index edged up less than a point, or 0.03 percent, to 1,662 shortly after 12 p.m. The Dow Jones industrial average rose eight points, or 0.1 percent, to 15,120. The Nasdaq composite index gained 12 points, or 0.3 percent, to 3,617.

Banks, which typically benefit from higher interest rates, were among the best-performers todaywith shares of Dow members Bank of America Corp. up 13 cents, or 1 percent, to $14.46 and JPMorgan Chase & Co. up 34 cents, or 0.7 percent, to $53.64. The S&P 500 Financial Index, a broad gauge of how well the banks are performing, was up 0.5 percent.

“You try to focus on stocks that usually benefit from higher interest rates -- banks are a good example,” said Brian Fox, who oversees $873.3 million in assets as co-manager of the FAM Value Fund.

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. The benchmark U.S. 10-year Treasury note rose to 2.81 percent, its highest level since July 2011. Late Thursday, the yield was 2.77 percent.

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., Lennar Corp. and D.R. Horton Inc. were up between 1 percent and 3 percent - making homebuilders the best performing sector in the S&P 500.

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 nearly 300 points, or roughly 2 percent, this week alone. The S&P 500, which is a broader gauge of the market, is down almost 30 points, or 1.8 percent. for the week. 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 $2.15, or 3.5 percent, to $57.19.

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 were down a penny to $13.70 -- below the proposed buyout price of $13.88 per share.