U.S. stock indexes retreated from record highs Monday, weighed down by falling utilities and real-estate shares.
Monday's pullback, which came as government bond yields jumped to new highs, marked the biggest one-day percentage decline for the S&P 500 and Dow Jones Industrial Average since September.
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Although the recent uptick in bond yields has prompted some analysts to question how much longer relatively risky stocks will remain attractive relative to Treasurys, some investors say the moves have yet to pose a threat to the stock rally.
"Could there be an uptick in inflation? Yes, but not to the point where we see the Fed has to be aggressive," said Michael Hans, chief investment officer of Clarfeld Financial Advisors.
Economic data has generally been upbeat, and corporate earnings results suggest S&P 500 firms are on track to post another quarter of earnings growth. That should help stocks keep climbing, Mr. Hans said, even as bond yields head higher.
The Dow Jones Industrial Average fell 177.23 points, or 0.7%, to 26439.48, closing near its session low. The S&P 500 lost 19.34 points, or 0.7%, to 2853.53, while the Nasdaq Composite shed 39.27 points, or 0.5%, to 7466.51.
Shares of utilities and real-estate companies, considered by many investors to be bondlike because of their relatively hefty dividends, were among the biggest decliners in the S&P 500, falling alongside U.S. Treasury prices.
Eversource Energy fell $1.63, or 2.5%, to $62.44, while CenterPoint Energy lost 73 cents, or 2.6%, to 27.73.
Deal news drove swings in individual stocks, with shares of Dr Pepper Snapple Group jumping 21.42, or 22%, to 117.07 after the company said it would be acquired by Keurig Green Mountain.
Meanwhile, a recent pickup in bond yields continued, with the yield on the benchmark 10-year U.S. Treasury note settling at 2.695%, the highest level since April 2014, compared with 2.661% on Friday.
Yields, which rise as bond prices fall, have ticked higher in recent sessions, as investors have bet on an uptick in growth and inflation following the passage of U.S. corporate tax cuts.
Elsewhere, the Stoxx Europe 600 fell 0.2%, pressured by declines in shares of utilities and real-estate companies.
Japan's Nikkei Stock Average closed flat, while stocks in China and Hong Kong ended lower.
Hong Kong's Hang Seng -- which had risen in 24 of the past 27 trading days, hitting multiple record highs on the way -- finished down 0.6%. Hong Kong-listed Wynn Macau lost 6.5% after The Wall Street Journal reported allegations of sexual misconduct at parent Wynn Resorts by founder Steve Wynn. Mr. Wynn has denied the allegations.
Wynn Resorts shares fell 16.81, or 9.3%, to 163.48 in the U.S., extending Friday's declines.
Later this week, investors are looking ahead to the Federal Reserve's two-day monetary policy meeting, as well as President Donald Trump's first State of the Union address and data on manufacturing and unemployment.
While analysts are largely expecting the Fed to hold short-term interest rates steady, the Fed's policy statement could give investors clues on future rate increases, said Mike Bell, global-market strategist at J.P. Morgan Asset & Wealth Management.
"We don't think they're going to do anything this week, but they may well lay the ground for a March rate hike," Mr. Bell said.
Kenan Machado contributed to this article.
Write to Akane Otani at firstname.lastname@example.org and Mike Bird at Mike.Bird@wsj.com
(END) Dow Jones Newswires
January 29, 2018 17:22 ET (22:22 GMT)
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