* AOL jumps to 15-month high on Verizon’s $4.4 bln offer
* 10-yr U.S. Treasury yields slip after touching 6-month highs
* Higher global bond yields threaten corporate expansion
* Indexes down: Dow 0.1 pct, S&P 0.2 pct, Nasdaq 0.2 pct (Updates to mid-afternoon, adds comment)
By Noel Randewich
May 12 (Reuters) - U.S. stocks were down on Tuesday afternoon as a recent run-up in global bond yields unsettled investors already concerned about an eventual Federal Reserve interest rate hike.
Stocks indexes had earlier fallen to their lowest in about a week but recovered some of those losses after Treasury yields ticked down slightly from six-month highs.
The recent, unexpected leap in yields on U.S. Treasuries and the Germany Bund has been a thorn in the side of U.S. stock investors for several days.
”In the short term, the market is a hostage to interest rates, said Jim Awad, managing director at Plimsoll Mark Capital. “To the extent you have an increase in interest rates that the Fed doesn’t control, you’re getting an unwanted tightening in the financial markets.”
Benchmark ten-year U.S. Treasury yields touched their highest since mid-November earlier in the day before coming down slightly. Elevated U.S. yields mean higher borrowing costs, which can make it harder for companies to expand.
That rise in borrowing costs comes as investors attempt to gauge when the Fed will deem the U.S. economy strong enough to begin raising its own interest rate for the first time since 2006.
At 2:02 p.m. the Dow Jones industrial average fell 25.83 points, or 0.14 percent, to 18,079.34, the S&P 500 lost 4.77 points, or 0.23 percent, to 2,100.56 and the Nasdaq Composite dropped 9.72 points, or 0.19 percent, to 4,983.85.
AOL shares jumped as much as 19.1 percent to $50.75, a 15-month high, after Verizon Communications said it would buy the company in a $4.4 billion deal, or $50 per share. Verizon was down 0.22 percent..
Google, the biggest contributor to losses on the Nasdaq, was down 1.34 percent.
Eight of the 10 major S&P 500 sectors were down, with the materials index leading the declines with a 0.88 percent fall.
The S&P energy index gained 0.44 percent as oil prices rose about 3 percent due to a weaker dollar and the conflict in Yemen.
Pall Corp rose 18.65 percent after the Wall Street Journal reported the water and air filter maker was in the final stages of an auction to sell itself.
Declining issues outnumbered advancing ones on the NYSE by 1,706 to 1,296, for a 1.32-to-1 ratio on the downside; on the Nasdaq, 1,576 issues fell and 1,105 advanced for a 1.43-to-1 ratio favoring decliners.
The benchmark S&P 500 index was posting 3 new 52-week highs and 6 new lows; the Nasdaq Composite was recording 44 new highs and 55 new lows. (Editing by Saumyadeb Chakrabarty and Meredith Mazzilli)