U.S. stocks fell in a volatile session on Thursday, with Wall Street extending a multiday decline and adding to the losses incurred in the worst session for the major averages in months as investors continued to fret over rising bond yields and the prospect of higher interest rates.
Shares fell globally, with steep losses in both Asia and Europe. Tech stocks were lower in premarket trading, while energy shares could also come under pressure as oil prices sink.
What are major benchmarks doing?
The Dow Jones Industrial Average
fell 170 points, or 0.7%, to 25,434. More than 20 of the blue-chip average’s 30 components were in negative territory.
The S&P 500
lost 19 points to 2,763, a decline of 0.7%. The benchmark index was on track for its sixth straight daily decline, its longest losing streak since a nine-day decline that ended in November 2016. Nine of the 11 primary S&P 500 sectors were lower.
The Nasdaq Composite Index
fell 23 points, or 0.3%, to 7,399.
All three fluctuated between slight gains and losses in the first hour of trading, though they subsequently turned decisively lower.
On Wednesday, both the Dow and the S&P suffered their biggest one-day drop since February, while the Nasdaq had its biggest slump since June 2016. The decline took the major indexes below key levels, which could be a catalyst for additional selling ahead. Both the Dow and the S&P closed below their 50-day moving averages, a closely watched metric for short-term momentum trends. This was the first time both have ended below this level since July.
Meanwhile, both the Nasdaq and the Russell 2000 ended below their 200-day moving averages on Thursday. This was the first time the Russell has done so since August 2017, and the first time the Nasdaq has ended below this crucial level for long-term momentum since June 2016.
At current levels, the Dow is 5.7% below its intraday record and it remains up 2.8% for 2018. The S&P is up 3.4% year to date, and is 6% under its record. The Nasdaq has gained 7.1% in 2018, but it is 9.1% under record levels.
The Russell 2000 index
of small-capitalization shares is up 2.6% in 2018, but at its low of the session it fell more than 10% below its record. Should it close with a drop of that magnitude from its peak, the index would be in correction territory.
What’s driving the market?
Investors have pinned the selloff on a variety of factors, including a sudden rise in long-dated interest rates since late September. A bond-market selloff saw the yield on the 10-year U.S. Treasury
top 3.26% early Tuesday for the first time since April 2011.
Higher yields raise borrowing costs for corporations. Higher yields can also offer competition to equities, luring investors away from stocks. Market turmoil, however, appeared to spark haven demand for U.S. paper, with the yield on the 10-year note down more than 6 basis points Thursday to 3.158%.
President Donald Trump stepped up his criticism of the Fed late Wednesday, blaming the central bank’s rate-hiking efforts for the stock-market weakness. Some analysts argue the Fed’s expected rate path is overly aggressive, while others contend strong underlying economic fundamentals justify the central bank’s outlook.
Continuing trade tensions with China and concerns about global growth have also been cited as factors behind the equity market’s downturn.
In the latest economic data, jobless claims rose by 7,000 in the latest week, although they remain near multidecade lows. Separately, the consumer-price index rose 0.1% in September. Core CPI, which excludes food and energy, rose by the same amount.
What are analysts saying
The market losses are “a reaction from investors finally realizing we are in a higher interest rate environment, and given the elevated level of stocks, market participants were likely looking for a reason to sell,” said Charlie Ripley, senior investment strategist for Allianz Investment Management. “Higher interest rates typically bring on tighter financial conditions which could dampen growth going forward and equity markets are reacting to that.”
He added, “we are witnessing the repercussions in the markets as the Fed takes the punch bowl away from the party.”
What stocks are in focus?
Investors will be watching formerly highflying growth stocks for further signs of weakness. Shares of Amazon.com Inc.
fell 2.9%. The e-commerce giant has lost nearly 10% thus far this week, and it has dropped in seven of the past eight sessions.
Google parent Alphabet Inc.
lost 0.4% and Apple Inc.
Shares of Walgreens Boost Alliance Inc.
rose 1% after the drugstore chain reported its quarterly results.
Delta Air Lines Inc.
rose 4% after the company reported third-quarter results that beat expectations.
Shares of L Brands Inc.
gained 9.6% after the Victoria’s Secret parent reported September sales that rose from a year ago and said it was pursuing “all alternatives” for its La Senza business.
gained 3.1% after Bristol-Myers Squibb Co.
said it would make a $12 million equity investment in the company, as part of a collaboration on a cancer treatment. Shares of Bristol lost 2.6%.
Shares of electric auto maker Tesla Inc.
may be in focus after Chief Executive Elon Musk denied a report late Wednesday that James Murdoch is the “favorite” candidate to replace him as chairman of the company. The stock fell 1.9%.
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