U.S. stocks bounced off of intraday lows in volatile trading Thursday as key indexes trimmed losses on building sentiment that the previous session’s steep selloff was overdone. Even so, the mood remained cautious as investors fret over rising bond yields and the prospect of higher interest rates.
Markets around the world fell in a global rout following Wall Street’s worst trading day in months Wednesday.
What are major benchmarks doing?
The Dow Jones Industrial Average DJIA, -0.74% fell 115 points, or 0.5%, to 25,481. At its low, the blue chip index was off more than 300 points.
The S&P 500 SPX, -0.83% lost 14 points, or 0.5%, to 2,771. The benchmark was on track for its sixth straight daily decline, its longest losing streak since a nine-day decline that ended in November 2016. Eight of the 11 primary S&P 500 sectors were lower.
The Nasdaq Composite Index COMP, -0.16% reversed direction to rise 9 points or 0.1%, to 7,429, thanks to a recovery in tech stocks which were the among the biggest decliners.
On Wednesday, 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. The Nasdaq also ended below their 200-day moving average, the first time the Nasdaq has closed below this crucial level since June 2016.
See: Why the stock market tumbled Wednesday, ushering in its worst start to a quarter in about 2 years
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 TMUBMUSD10Y, -0.62% top 3.26% early Tuesday for the first time since April 2011.
Higher yields raise borrowing costs for corporations. They also divert investment away from stocks. Market turmoil, however, appeared to spark haven demand for U.S. bonds, with the yield on the 10-year note down more than 6 basis points 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.
Check out: What Trump’s tirade against ‘loco’ Fed means for the markets
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 at the same pace.
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.”
JC O’Hara, chief market technician at MKM Partners, said some of the hardest hit stocks were those that had risen sharply this year, suggesting that investors were motivated by profit-taking.
“When winners get hit, stops are triggered and selling begets more selling. It’s never easy to exit the party all at once,” he said in a note. “We believe when the profit taking has runs its course the market should stabilize.”
Read: As stocks sell off, analysts debate whether the recent record was a market top
What stocks are in focus?
Shares of Walgreens Boost Alliance Inc. WBA, -0.24% rose 0.9% after the drugstore chain reported its quarterly results.
Delta Air Lines Inc. DAL, +4.61% climbed 4.9% after the company reported third-quarter results that beat expectations.
Shares of L Brands Inc. LB, +7.21% jumped 7.9% after the Victoria’s Secret parent reported its September sales rose from a year ago and said it was pursuing “all alternatives” for its La Senza business.
See: These stocks in the Dow Jones Industrial Average, S&P 500 and Nasdaq declined the most Wednesday
Compugen Ltd. CGEN, +1.85% gained 5.2% after Bristol-Myers Squibb Co. BMY, -3.37% 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 3%.
Shares of Tesla Inc. TSLA, -1.67% shed 1.7% 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.
What are other markets doing?
Asian markets fell in the wake of Wall Street’s retreat with China’s Shanghai Composite SHCOMP, -5.22% sinking 5.2% while European stocks were broadly lower as well.
Crude oil prices CLX8, -2.68% slumped and gold prices GCZ8, +2.88% rallied while the U.S. dollar index DXY, -0.37% dropped.
—William Watts contributed to this report
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