By Isabel Wang and Joseph Adinolfi
U.S. stocks closed lower on Thursday with technology stocks leading the way down, as bond yields marched further ahead of a likely Federal Reserve interest rate rise next week.
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.0047% finished 173.27 points lower, down 0.6%, at 30,961.82.
The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.19% dropped 44.66 points, or 1.1%, ending at 3,901.35.
The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -0.51% declined 167.32 points, or 1.4%, to finish at 11,552.36.
On Wednesday, the Dow Jones Industrial Average eked out a gain of 0.1%, while the S&P 500 rose 0.3% and the Nasdaq Composite gained 0.7%.
What drove markets?
Big technology stocks led declines Thursday with the 2-year Treasury yield trading around 40 basis points above the 10-year yield, suggesting an economic slowdown ahead as investors digested a mixed batch of economic data.
The yield on the 2-year Treasury note climbed for a sixth straight trading session on Thursday, reaching its highest level since October 2007. The 2-year yield BX:TMUBMUSD02Y rose 8.9 basis points to 3.871%, while the 10-year yield BX:TMUBMUSD10Y was up 4.7 basis points to 3.458%.
“There are three inputs driving markets today and the largest of them is people being hyper-focused on the yield curve, especially the two year, which remains stubbornly high,” said Art Hogan, chief market strategist at B. Riley Financial.
“This is a reflection of our interpretation of what monetary policy will be in the short term,” he said.
With stocks still smarting from Tuesday’s disappointing U.S. consumer price inflation data which triggered the worst one-day selloff in two years, investors were relieved though that a nationwide railway strike had been averted.
The stocks of railroad operators were mixed as President Biden spoke publicly to confirm news of the deal, with Union Pacific Corp. /zigman2/quotes/209717171/composite UNP +0.51% up 0.2%, while Canadian Pacific Railway Limited /zigman2/quotes/204163517/composite CP +0.05% finished 1.3% lower. The Dow Transportation Average /zigman2/quotes/210598063/delayed DJT -0.94% was down 1.1%.
In U.S. economic data Thursday, retail sales rose 0.3% in August as Americans spent more on new cars and trucks and went out to eat more, suggesting the economy grew at a steady pace toward the end of the summer.
Meanwhile new jobless benefit claims fell by 5,000 to 213,000 in the week ended Sept. 10, the Labor Department said, suggesting the labor market remains healthy.
However, two regional gauges of manufacturing sentiment moved into slight contraction territory in September, according to data released Thursday.