Declines in U.S. stocks accelerated Thursday, a pullback that many investors and analysts said had been overdue with indexes at highs and volatility near record lows.
The Dow Jones Industrial Average fell for a third straight session, shedding 205 points Thursday, or 0.9%, to 21844.01 in the blue-chip index's biggest one-day decline since May 17.
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Investors have enjoyed a global stock rally with few interruptions this year, something many have attributed to the improving health of U.S. companies and steady global economic growth. Before its slide, the Dow industrials climbed to nine consecutive record highs through Monday and topped 22000 for the first time Aug. 2.
But financial markets were jolted out of their period of calm this week after tensions between North Korea and the U.S. escalated, and several earnings releases disappointed.
"You have these periods of large runs, and that's often followed up by pullbacks; and that's what we're seeing," said William Hamlyn, senior investment analyst at Manulife Asset Management.
Investors retreated from several of this year's top performers on Thursday, including shares of large U.S. technology companies and biotechnology firms, while lifting shares of utilities companies -- often thought of as bond proxies because of their relatively hefty dividends.
The tech-heavy Nasdaq Composite underperformed its peers, falling 135.46 points, or 2.1%, to 6216.87. Its three-day decline of 2.6% was its biggest since the three days ended Sept. 9.
The S&P 500 slid 35.81 points, or 1.4%, to 2438.21. As stocks fell, the CBOE Volatility Index, a measure of investors' expectations for swings in the S&P 500 over the next 30 days, surged 44% -- posting its second-biggest one-day jump of the year. The VIX has hovered near record lows this year.
A series of downbeat corporate reports also weighed on U.S. stocks.
Retailers slid after department stores Macy's and Kohl's both said same-store sales continued to decline in the second quarter. Shares of Macy's lost 10%, and Kohl's fell 5.8%.
Shares of Blue Apron Holdings fell 18% after saying it lost more money than analysts had expected in its first quarterly earnings report since going public in June.
As the second-quarter earnings season has wound down, stock-trading volumes have been relatively low -- a factor that can exacerbate swings in the broader market.
Some investors said it was too early to tell whether the week's moves marked the beginning of a deeper downturn. Selling has remained relatively orderly, with no apparent signs of panic, some traders said.
"It's hard to consider a lot of 'what-ifs' before they happen," said Frank Cappelleri, executive director of brokerage Instinet. "The way the S&P has reacted, it doesn't seem like people are pricing in nuclear war."
Mr. Cappelleri said he would need to see more pullbacks of at least 1% before becoming worried about the stock market.
The unease about the relationship between the U.S. and its allies and North Korea is more prominent in other markets, several market strategists noted.
The Korean won has depreciated against the dollar, down 1.5% this week. Similarly certain havens, such as U.S. government bonds, have risen.
"As a portfolio manager, you say, 'Do I think we'll get a war out of this?'," said Torsten Slok, chief international economist at Deutsche Bank. "If the answer is yes, then you better get defensive. If you think this is just rattling sabers, and it's just words, then you could view this as a buying opportunity."
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(END) Dow Jones Newswires
August 10, 2017 17:08 ET (21:08 GMT)