U.S. stocks and bond yields fell, with the S&P 500 flirting with a bear market, as lingering investor concerns about the health of the economy prolonged the recent selloff.
The major indexes plunged early in Thursday’s session, a day after falling 4%, before regaining ground. They eventually ended lower, with all three on track for weekly losses of at least 2.9%. Worries about consumer spending, which helped pull the market out of pandemic lows, weighed on stocks and bond yields.
The S&P 500 fell 22.89 points, or 0.6%, to 3900.79, closing in on bear market territory – a market shortcut for a 20% drop from a recent high. The Dow Jones Industrial Average fell 236.94 points, or 0.8%, to 31,253.13. Both indices closed at their lowest level since March 2021.
The Nasdaq Composite Index, which entered bearish territory earlier this year, fell 29.66 points, or 0.3%, to 11388.50.
Investors bought government bonds, seen as a safe haven asset in times of economic uncertainty. The yield on 10-year Treasury bills fell to 2.854% from 2.884% on Wednesday, losing ground on seven of the past nine trading days. Yields and bond prices move in opposite directions.
Earnings reports from some of America’s biggest retailers in recent days have added to concerns that the highest rate of inflation in four decades is catching up with American consumers and pushing the economy into recession. Investors were already grappling with the end of an era of accommodative monetary policy that fueled big gains for stocks and other riskier assets. The combination of factors has resulted in steep losses for equities and some corporate bonds recently, and many investors expect the volatility to continue.
“Price action suggests it’s not over,” said Philip Saunders, portfolio manager at Ninety One,
an asset manager based in the UK and South Africa.
Shares of Kohl gained $1.91, or 4.4%, to $45.04, after executives said suitors remained interested in buying the company, said sales fell in April, making it the latest retailer to report inflationary demand pressures. Walmart and Target said this week that rising costs squeezed profits last quarter, prompting a selloff in their stocks that rippled through the broader market.
Cisco Systems fell $6.64, or 14%, to $41.72 after the communications equipment company missed analysts’ expectations for its quarterly results. BJ’s Wholesale Club said gasoline sales boosted first-quarter revenue and profit, sending shares up more than $3.97, or 7.4%, to $57.39.
In economic news, the Labor Department said new jobless claims rose for the third straight week. Initial jobless claims, an indicator of layoffs, remain historically low. Separately, U.S. home prices peaked in April, new data shows, while the number of sales fell.
Anthony Saglimbene, global markets strategist at Ameriprise Financial, said economic data points to healthy consumer spending, easing fears of a recession.
“For consumers to really cut back on spending, they have to worry about losing their jobs and that’s just not the environment we find ourselves in,” Saglimbene said.
Some analysts, however, say a slowdown in consumer spending could mean the Federal Reserve would not have to raise interest rates as aggressively to reduce consumer demand.
“Some slowdown in discretionary spending will help to organically or naturally ease supply chain constraints,” said Seth Wunder, chief investment officer at Acorns. “At the end of the day, this is one of the main contributors to the inflation problems we face.”
The war in Ukraine adds to inflationary pressures prompting the Fed to embark on a series of interest rate hikes and reduce its bond holdings. And the Covid-19 shutdowns in China have led to a sharp slowdown in the world’s second-largest economy. Some investors say the upcoming interest rate hike will normalize investors’ return expectations.
“We’re going through a recalibration process and that’s a good thing,” said Todd Lowenstein, chief equity strategist for The Private Bank at Union Bank. “Short term it will be painful, but sometimes you need short term pain to recondition the behavior.”
The last time the S&P 500 fell into a bear market was during the pandemic panic of March 2020. It was short-lived and the market quickly embarked on a two-year rally that peaked this 3 january. more weighted to industrials and old line banking stocks, have performed less poorly and are still far from bearish territory.
“Adding monetary policy tightening, we have a recipe for volatility and investor jitters,” said Clara Cheong, global market strategist at JP Morgan Asset Management.
The global oil benchmark, Brent, gained $2.93 a barrel, or 2.7%, to $112.04 a barrel. In cryptocurrency markets, bitcoin added 3.5% from its level at 5 p.m. ET on Wednesday to trade at $30,213.64, up in the past three out of five days.
International equities fell. The Stoxx Europe 600 lost 1.4%, driven by shares of financial services and restaurant companies. Hong Kong’s Hang Seng Index fell 2.5%.
Elsewhere in Asia, the CSI 300 index of the largest stocks listed in Shanghai and Shenzhen edged up 0.2%. Japan’s Nikkei 225 fell 1.9% and South Korea’s Kospi Composite fell 1.3%.
—Dave Sebastian contributed to this article.
Corrections & Amplifications
The Nasdaq Composite Index fell into bearish territory in March. An earlier version of this article incorrectly stated that he did so in February. (Corrected May 19)
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