* 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
* Indices end lower: Dow 0.2 pct, S&P 0.29 pct, Nasdaq 0.35 pct (Updates with close)
By Noel Randewich
May 12 (Reuters) - U.S. stocks ended lower on Tuesday after a recent run-up in global bond yields unsettled investors already concerned about an eventual Federal Reserve interest rate hike.
Stocks recovered from steeper losses after Treasury yields crept back slightly from six-month highs.
The recent, unexpected leap in yields on U.S. Treasuries and German Bunds 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 10-year U.S. Treasury yields touched their highest since mid-November earlier 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.
The Dow Jones industrial average fell 36.94 points, or 0.2 percent, to end at 18,068.23. The S&P 500 lost 6.21 points, or 0.29 percent, to finish at 2,099.12 and the Nasdaq Composite dropped 17.38 points, or 0.35 percent, to 4,976.19.
If borrowing costs eventually rise enough to threaten the U.S. economic recovery, the Fed will have few options at its disposal since its key interest rate is already near zero, Awad said.
The growing uncertainty about interest rates comes as the S&P 500 trades near 17 times expected earnings, expensive compared to its 10-year median average of 15 times earnings.
AOL shares jumped 18.62 percent to end at $50.52 after Verizon Communications said it would buy the company in a $4.4 billion deal, or $50 per share. Verizon declined 0.36 percent..
Apple, the biggest contributor to losses on the Nasdaq and S&P 500, dipped 0.36 percent.
Eight of the 10 major S&P 500 sectors were down, with the materials index leading the declines with a 1.03 percent fall.
The S&P energy index gained 0.44 percent as oil prices rose about 3 percent due to a weaker dollar and conflict in Yemen.
Pall Corp rose 19.44 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 1,679 to 1,367, for a 1.23-to-1 ratio on the downside; on the Nasdaq, 1,556 issues fell and 1,187 advanced for a 1.31-to-1 ratio favoring decliners.
The S&P 500 posted 4 new 52-week highs and 6 new lows; the Nasdaq Composite recorded 59 new highs and 60 new lows.
About 5.9 billion shares changed hands on U.S. exchanges, below the 6.8 billion daily average for the last five sessions, according to BATS Global Markets. (Editing by Meredith Mazzilli and Nick Zieminski)