May 29 - Summary of business headlines: U.S. equities fall to two-week lows as bond yields rise amid speculation the Fed is close to slowing bond purchases; Former Fed Chief Paul Volcker says Fed is carrying too much weight in recovery; home stocks hurt by falling loan demand. Conway G. Gittens reports.
Rising bond yields spooked the stock market as higher interest rates rival dividend-paying stocks. Blue chips had their worst day since the beginning of the month but market losses were even bigger throughout the day. Telecom companies like Verizon fell victim to a rotation out of high-paying dividend stocks but the selling seemed indiscriminate. Looking at the top losers in the Dow: Coca-Cola, Pfizer, Verizon, and Procter & Gamble - each from different sectors of the economy. Housing was particularly weak on the back of signals from the mortgage market. Mortgage activity dropped last week, led by double-digit declines in refinancings and home loan rates at a one-year high. The Mortgage Bankers Association Index responding to fears the Federal Reserve could soon start winding down extra stimulus. Look at the Homebuilders: Beazer, Toll, Lennar, Pulte and KB - all down between 3 and 5 percent. Former Fed Chairman Paul Volcker says the Fed is being asked to bear too much responsibility for this economic recovery. SOUNDBITE: FORMER FEDERAL RESERVE CHAIRMAN PAUL VOLCKER (ENGLISH) SAYING: "We shouldn't ask the Federal Reserve to be managing the mortgage market or managing other markets. They manage the amount of liquidity in the economy and it has an influence on interest rates for everybody but the fundamental responsibility is not to pay attention to particular parts of the economy because that is going to get them in trouble." Forget about where's the beef? Where's the pork? Smithfield Foods, the biggest U.S. pork producer- agreeing to be acquired by China's Shuanghui International for nearly $5 billion in cash. If the deal goes through it will be the biggest Chinese acquisition of a U.S. company to date. Shares of Smithfield surged 28 percent. Michael Kors continues to score gains with the luxury crowd. Sales far exceeded forecasts with gains seen in all geographic locations - even in austerity-hit Europe. And speaking of Europe - stocks fell as investors there also worry about when the Fed will begin scaling back bond purchases.