By Thornton McEnery and William Watts
U.S. stock indexes gave up an early session rebound and turned negative in the final hour of trading Thursday, repeating Wednesday’s volatile pattern and pushing the tech-heavy Nasdaq Composite further into correction territory this week.
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.56% closed down 313.26 points, or 0.9% at 34,715.39.
The S&P 500 /zigman2/quotes/210599714/realtime SPX +0.87% fell 50.03 points, or 1.1%, to 4,482.73.
The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +1.06% fell 186.23 points, or 1.3%, to 14,154.02. At one point, the index was up 2.1%, making Thursday’s whipsaw the Nasdaq’s largest same-day reversal since April 7, 2020.
Stocks fell Wednesday, with the Dow and S&P 500 each dropping around 1%, while the Nasdaq Composite shed 1.2%, leaving it down more than 10% from its record close in November and meeting the definition of a market correction.
What drove markets
Investors might want to get up and stretch, because Thursday probably gave them a nasty case of stock market whiplash.
All three major indexes looked to bounce back on Thursday morning, with the Dow gaining more than 380 points before noon, but a late day reversal saw stocks fall off the table as investors revealed some very deep unease and stopped “buying the dip” to “sell the rally.”
“That was pretty wild,” said Edward Moya, senior market analyst at Oanda. “We definitely faded those gains. The growth story in equities will be dragged out but we seem to be done with the pandemic story of buying every dip and not looking back.”
Stocks have struggled since the beginning of the year as bonds have sold off. The yield on the benchmark 10-year Treasury /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.02% has surged more than 30 basis points this year, hitting a two-year high earlier this week, while the 10-year German /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y +1.39% bund yield turned positive for the first time in three years on Wednesday.
The rise in yields was seen taking a bigger toll on growth stocks, which are heavily represented in the Nasdaq Composite. Growth stock valuations are based on expectations for cash flow far into the future. When Treasury yields rise, the value of that future cash is discounted. Yields pulled back Wednesday and the 10-year rate was up 0.7 basis point at 1.834% Thursday.
On Thursday, investors continue to wade through corporate results, including airlines, as earnings season picks up steam.
In U.S. economic data Thursday, first-time jobless claims unexpectedly rose by 55,000 last week to 286,000 , compared with expectations for 225,000, likely reflecting the effect of the spread of the omicron variant of the coronavirus that causes COVID-19.