U.S. stocks traded firmly lower Thursday, with losses widespread across the economy as investors fretted over a rise in bond yields, which threatened to end a five-day rally for the Dow Jones Industrial Average.
Where are the major benchmarks trading?
The Dow Jones Industrial Average DJIA, -0.81% fell 204 points, or 0.8%, to 26,686. The blue-chip average was on track for its biggest one-day percentage drop since July, though it is coming off its fifth straight advance, as well as a record close.
The S&P 500 index SPX, -0.81% lost 19 points to 2,906, a decline of 0.7%. The Nasdaq Composite Index COMP, -1.51% lost 109 points to 7,915, a drop of 1.4% that had some indications of panic-like selling.
The Cboe Volatility Index VIX, +16.11% meanwhile, spiked 14%, or 1.63 point, to 13.24. While Wall Street’s so-called “fear index” remains well below its long-term average between 19 and 20, it was on track for its biggest one-day pop in about two months. The index tends to rise as stocks fall.
The day’s losses were widespread, with 10 of the 11 primary S&P 500 sectors in negative territory for the day. Among the biggest decliners were the communication-services group—where losses were driven by Facebook FB, -2.12% Netflix NFLX, -2.62% and Google-parent Alphabet GOOG, -2.92% GOOGL, -3.09% all of which fell more than 1%—and the technology sector. Apple Inc. AAPL, -1.39% fell 1% while Microsoft Corp. MSFT, -1.76% was down 1.8%.
The sole sector in positive territory was financials, which rose 1.1%. The industry tends to outperform in periods of rising rates and bond yields; among notable gainers, JPMorgan Chase & Co. JPM, +0.62% rose 1.7% while Bank of America BAC, +1.17% climbed 1.9% and Citigroup Inc. C, +0.20% added 1.6%.
What’s driving markets?
Bond yields remain in focus on Thursday. The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +0.61% rose 4.4 basis points to 3.20%, hitting its highest level since 2011. This comes a day after its largest one-day rise since November 2016. Investors dumped bonds as economic indicators point to continued strength in the economy.
Read: 3 reasons why U.S. government bond yields are soaring
A higher yield can damp enthusiasm for stocks, as it offers higher returns for income-seeking investors, without the risk or volatility that can come with equities.
In the latest economic data, jobless claims fell by 8,000 in the latest week and hover near multidecade lows. The report comes after Wednesday’s strong reading on private-sector employment, and a day before the closely watched September jobs report. Separately, factory orders rose 2.3% in August, a tick above the 2.2% that had been expected.
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What are market analysts saying?
“We’ve had really strong data and commentary from Fed officials, which is bullish for equities, but that comes with the side effect of having people think we should expect more inflation and interest-rate increases, which in turn is a negative for equities,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab. “The long-term uptrend remains intact, but given these issues, there’s limited room for upside in the short-term, especially since markets are at or near records.”
What stocks are in focus?
Cloudera Inc. CLDR, +11.77% and Hortonworks Inc. HDP, +11.84% late Wednesday announced an agreement to merge. Shares of Cloudera jumped 12% while Hortonworks was up 13%.
Shares of Barnes & Noble Inc. BKS, +21.61% jumped 17% after the bookstore chain said its board of directors has decided to enter a formal review process to evaluate “strategic alternatives” for the company.
Eli Lilly & Co. LLY, +3.46% announced positive results from a trial of its diabetes treatment. The stock rose 3.3% and hit record levels.
Shares of Arrowhead Pharmaceuticals Inc. ARWR, -13.90% fell 13% after it entered a $3.7 billion license and cooperation agreement with Janssen Pharmaceuticals Inc. to develop and commercialize its ARO-HBV treatment for chronic hepatitis B.
Pier 1 Imports Inc. PIR, -1.30% late Wednesday reported a second-quarter loss that widened from the prior year and was wider than expected, along with revenue that missed expectations. Shares fell 1%.
Where are other markets trading?
Shares in Asia ended lower, with Hong Kong’s Hang Seng Index HSI, -1.73% down 1.7%. Major European indexes were also lower on the day.
Crude-oil prices CLK9, -0.83% pulled back slightly from a four-year high, while gold GCM9, +0.26% was little changed on the day. The U.S. dollar index DXY, -0.30% rose 0.1%.
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