* Dow's 2.2 percent weekly drop biggest since June, 2012
* Stocks of homebuilders advance on rise in housing starts
* Green Mountain Coffee, which joining Nasdaq 100 index, rises
* Dow down 0.2 pct, S&P down 0.3 pct, Nasdaq down 0.1 pct
By Caroline Valetkevitch
NEW YORK, Aug 16 U.S. stocks fell slightly on Friday, and the Dow industrials posted the biggest weekly loss this year as rising bond yields hurt shares paying rich dividends and earnings from retailers disappointed investors.
The S&P 500 utilities sector, down 1.1 percent, led the day's decline as the yield on the benchmark 10-year U.S. Treasury note rose to 2.83 percent, making the highest dividend-paying stocks less attractive.
Nordstrom late Thursday was the most recent department store chain to miss revenue estimates. The upscale retailer cut its full-year sales and profit forecasts. Shares fell 4.9 percent to $56.43.
Earlier this week, Macy's reported an unexpected decline in sales and blamed hesitation by consumers. Macy's stock was down 2.8 percent to $44.99.
It was a second week of losses for the major indexes. The Dow fell 2.2 percent for the week, its biggest decline since June 2012, while the S&P 500 and Nasdaq registered their biggest weekly losses since June, 2013.
"Given how the consumer has been such a powerhouse, I think these are things that make you at least stop and wonder if you should be an aggressive buyer of retail stocks," said Eric Kuby, chief investment officer, North Star Investment Management Corp, Chicago.
The Dow Jones industrial average was down 30.72 points, or 0.20 percent, at 15,081.47. The Standard & Poor's 500 Index was down 5.49 points, or 0.33 percent, at 1,655.83. The Nasdaq Composite Index was down 3.34 points, or 0.09 percent, at 3,602.78.
For the week, the S&P 500 was down 2.1 percent and the Nasdaq was down 1.6 percent.
Adding to the market's concern, the Thomson Reuters/University of Michigan's preliminary reading on consumer sentiment in August slipped from July's six-year high.
Other data showed U.S. housing starts rose 5.9 percent in July, compared with a 9.9 percent drop in June. Homebuilders Pulte Group and Lennar Corp gained on the news.
Pulte shares rose 2.3 percent to $16.28, while Lennar advanced 1.8 percent to $33.88.
Green Mountain Coffee Roasters shares rose 3.3 percent to $76.38 after Nasdaq OMX said the company will replace Life Technologies in the Nasdaq 100 index on Aug. 22.
Volume was roughly 4.8 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, well below the average daily closing volume of about 6.4 billion this year.
Decliners beat advancers on the NYSE by nearly 2 to 1 while on the Nasdaq decliners beat advancers by about 13 to 11.