Stocks slide as rate worries take hold

NEW YORK (CNNMoney.com) -- Stocks fell Friday as the biggest public offering in five years failed to excite investors still nervous over rising bond yields.

The Dow Jones industrial average (down 68.69 to 13,477.15, Charts) fell about 0.5 percent about two and a half hours into the session. The broader S&P 500 (down 9.49 to 1,512.70, Charts) slipped 0.6 percent while the tech-laden Nasdaq (down 18.64 to 2,598.32, Charts) also lost about 0.6 percent.

After a brief delay at the open, private equity firm Blackstone (Charts) debuted on the New York Stock Exchange at $36.45 a share, about an 18 percent premium over the price underwriters paid for the stock Thursday.

Blackstone priced 133.33 million shares at $31 a share Thursday to raise $4.13 billion. If underwriters exercise an option to to buy an additional 20 million shares, the total offering would be boosted to $4.75 billion, making it the largest U.S. IPO in five years and the sixth largest ever.

But the IPO action didn't do much for the broader market, which had no major economic news to trade on Friday and is still reeling from nervousness about rising interest rates.

After beginning lower, Treasury prices actually moved slightly higher Friday, lowering the yield on the 10-year note to 5.17 percent. Bond prices and yields move in opposite directions.

But one trader blamed Friday's depressed market on lingering concern over higher interest rates.

"People might not want to be long going into the weekend," said Jay Suskind, co-head of capital markets at Florham Park, N.J.-based brokerage Ryan Beck & Co. "The market has been quite volitile in the last few weeks, based on interest rates and inflation and stuff like that."

Treasury yields have jumped in recent weeks on concerns over rising rates and inflation worldwide, especially in red hot economies such as China.

Investors have worried that higher rates could further damage the already battered housing market and crimp consumer spending. On top of that, a rate increase could slow corporate borrowing, which has fueled much of the recent merger and buyout activity that's helped lift stocks this year.

The potential closure of two Bear Stearns hedge funds hit by big losses in securities backed by subprime mortgages hasn't helped stocks either, and the Dow is down about 150 points for the week.

In corporate news, BP (Charts), facing pressure from the Kremlin, is close to a deal that would give up its holdings in a $20 billion Russian natural-gas project to state-controlled gas monopoly Gazprom, according to a report in the Wall Street Journal.

Standard & Poor's announced late Thursday that three companies being spun off from Fortune 500 companies would join that benchmark index, displacing three other companies. Two of the spinoffs will come from conglomerate Tyco (Charts) - Covidien, its maker of medical devices and supplies and electronics, while credit card issuer Discover Financial will be spun off from Morgan Stanley (Charts, Fortune 500).

The announcement hit the stocks of the three companies that will be dropped from the index, Sanmina-SCI (down $0.02 to $3.39, Charts, Fortune 500), PMC-Sierra (down $0.36 to $7.78, Charts) and ADC Telecommunications (down $0.66 to $18.48, Charts), which all saw their their shares fall in Friday trading.

The dollar hit a 4-1/2-year high against the yen, which was blamed on investors exiting low-yield holdings in the Japanese currency. The dollar fell against the euro.

Oil prices rose as talks failed between the Nigerian government and labor union officials aimed at ending a general strike in Africa's largest oil exporter. U.S. light crude gained 56 cents to $69.21 a barrel.

European shares finished down. Markets in Asia ended mostly lower, although Hong Kong shares rallied.

Market breadth was negative, but trading was light - as is often the case on summer Fridays.

On the New York Stock Exchange, losers beat winners by more than two to one on volume of 566 million shares. On the Nasdaq, decliners topped advancers by a margin of more than two to three on volume of 716 million shares.