Private-sector employers add 153,000 jobs in June
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U.S. stocks retreated Thursday on a combination of geopolitical jitters and growing signs that global central banks are inching closer to unwinding policies that have helped to support prices in both stocks and government bonds.
A round of economic data, including readings on private-sector payrolls and weekly layoffs, appeared to do little to soothe worries about the pace of the Federal Reserve's policy plans while investors rotating out of battered technology stocks to chase returns in other sectors also contributed to the broader market's weakness.
The S&P 500 was off by 11 points, or 0.5%, to 2,421, with nine out of its 11 sectors trading in negative territory. Telecoms and real-estate shares were leading the declines.
Some analysts speculated that rising bond yields are hurting investor sentiment.
"People are nervous about bond yields going up and you can see that in exaggerated moves in technology stocks and financials," said Ian Winer, head of the equities division at Wedbush Securities.
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The Nasdaq Composite Index fell 27 points, or 0.5%, to 6,123, erasing its modest gains from the previous session.
The Dow Jones Industrial Average dropped 84 points, or 0.4%, to 21,393. General Electric Co. (GE) and Merck & Co.(MRK) were down sharply.
Read:B. of A. warns the rise of ETFs is distorting the stock market (http://www.marketwatch.com/story/bofa-warns-the-rise-of-etfs-is-distorting-the-stock-market-2017-07-05)
"There are a lot of things keeping risk appetite in check," said Chris Beauchamp, senior market analyst at IG in London. "Geopolitical worries are beginning to bear down" on Wall Street and in Europe , where losses in regional benchmarks on Thursday accelerated, he said.
Investors are also increasingly becoming risk-averse due to escalating tensions surrounding North Korea's test launch this week of an intercontinental ballistic missile, sparking a "broader move out of equities back to bonds" as they sought safe havens, Beauchamp said.
President Donald Trump said Thursday in Warsaw that he's considering "some pretty severe things" in response to North Korea's (http://www.marketwatch.com/story/trump-considering-pretty-severe-things-over-north-korea-threat-2017-07-06) ongoing efforts to develop nuclear weapons that can reach the U.S.
Read:U.S., Russia clash at U.N. over approach to North Korea threat (http://www.marketwatch.com/story/us-russia-clash-at-un-over-approach-to-north-korea-threat-2017-07-06)
"The market is not getting too panicky just yet, but you're into that July, August, September period where we could see a bit of a grind," he added.
Meanwhile, the general shift from tech to other stocks that began in early June is still in play, according to Mike Antonelli, equity sales trader at Robert W. Baird & Co.
"The rotation out of tech is dominating stocks and is the overarching theme in the market," he said. "People should not mistake rotation for volatility and I am not terribly freaked out as investors are not selling everything equally."
Economic docket:Private-sector employers (http://www.marketwatch.com/story/private-sector-job-growth-throttles-back-in-june-adp-says-2017-07-06)added a seasonally-adjusted 153,000 jobs during the month, below the 180,000 jobs that a consensus of economists had forecast. Meanwhile, initial jobless claims (http://www.marketwatch.com/story/us-jobless-claims-climb-4000-to-248000-2017-07-06) in the period between June 25 and July 1 increased 4,000 to a seasonally adjusted 248,000.
Economists use these numbers to get a feel for the official nonfarm payrolls due on Friday, with the consensus estimate at 179,000 new jobs created in June. The Federal Reserve closely watches labor-market conditions as part of its monetary-policy assessment, and the report comes as investors continue to unpack the Fed minutes released Wednesday.
Those minutes left many uncertain as to policy makers' strategy for reducing the Fed's $4.5 billion in debt holdings (http://www.marketwatch.com/story/fed-might-start-balance-sheet-drawdown-in-september-fomc-minutes-hint-2017-07-05), which has acted as support for the U.S. economy.
Separately, the trade deficit (http://www.marketwatch.com/story/trade-deficit-drops-23-in-may-but-the-trend-is-no-friend-2017-07-06) fell 2.3% to $46.5 billion in May from $47.6 billion in April, largely because of fewer imports of cellphones and other consumer goods, but the longer-run outlook for the U.S. was still grim.
The Institute for Supply Management's nonmanufacturing index (http://www.marketwatch.com/story/service-sector-accelerates-in-june-ism-survey-finds-2017-07-06)rose to 57.4% in June from 56.9% in May, topping the MarketWatch-compiled economist consensus for a reading of 56.5%.
As for Fed speakers, Vice Chairman Stanley Fischer will speak about government policy and labor productivity at 7:30 p.m. Eastern at Martha's Vineyard Hebrew Center Summer Institute in Vineyard Haven, Mass.
See: MarketWatch's economic calendar (http://www.marketwatch.com/economy-politics/calendars/economic).
Stocks in focus: GE shares fell 3.1% after the European Union's antitrust watchdog (http://www.marketwatch.com/story/ge-canon-merck-kgaa-accused-of-antitrust-moves-2017-07-06) said GE may have misled regulators when the EU was reviewing its $1.65 billion deal with LM Wind Power.
Tesla Inc.(TSLA) declined 4.4% after the electric-car maker's Model S failed to receive a top safety award (http://www.marketwatch.com/story/teslas-stock-drops-after-model-s-fails-to-qualify-for-top-safety-award-2017-07-06) from the Insurance Institute for Highway Safety. Its shares tumbled on Wednesday (http://www.marketwatch.com/story/teslas-stock-tumbles-into-correction-territory-but-analysts-sees-new-highs-ahead-2017-07-05) after a disappointing sales-delivery update.
L Brands Inc.(LB) shares tumbled 13% as Victoria's Secret's parent company posted a 6% drop in June sales (http://www.marketwatch.com/story/victorias-secret-parent-l-brands-shares-fall-after-june-sales-decline-2017-07-06).
Shares of Costco Wholesale Corp.(COST) rose 0.8% after the retailer reported better-than-expected sales numbers for June.
Other markets: The ICE Dollar Index , which measures the buck against a basket of six currencies, was down 0.4%. Gold was flat and oil futures jumped more than 2% (http://www.marketwatch.com/story/oil-bounces-back-after-worst-loss-in-a-month-ahead-of-eia-data-2017-07-06).
Treasury yields moved higher, with the yield on the 10-year note up 5 basis points to 2.37%.
Stock markets in Asia finished mostly lower, with the Nikkei Stock Average losing 0.4% and European markets also finished lower on signs that the ECB may be prepared to scale back its quantitative easing.
--Carla Mozee contributed to this report.
(END) Dow Jones Newswires
July 06, 2017 13:47 ET (17:47 GMT)