Declines in U.S. stocks accelerated Thursday, a pullback that many investors and analysts said was overdue with indexes at highs and volatility at record lows.
The Dow Jones Industrial Average fell for a third straight session, shedding 204.69 points, or 0.9%, to 21844.01 Thursday in the 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 records 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.
Investors have been pointing to a number of factors that could drive stocks lower, including valuations that are elevated relative to historical levels, and an uncertain outlook for monetary and fiscal policy.
The rhetoric around North Korea helped spark what many investors refer to as a healthy selloff in stocks, said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute.
"I think the market was looking for an excuse to sell off, and this was a good excuse," Mr. Wren said.
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 decline of 2.6% since Monday's close 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% to 16.04 -- its highest level since Election Day. The VIX fell to a new intraday low in late July.
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 latest quarter. Shares of Macy's lost $2.36, or 10%, to $20.67, their lowest close since 2010. Kohl's fell $2.43, or 5.8%, to $39.50.
Shares of Blue Apron Holdings fell $1.10, or 18%, to $5.14 -- its lowest close ever -- after the company cited rising costs and increasing competition from other food, grocery and meal-kit delivery services in its first quarterly earnings report since going public in late June. Blue Apron has fallen 49% from its IPO price of $10 a share.
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 North Korea was more prominent in other markets, several market strategists said.
The Korean won has depreciated against the dollar, down 1.5% this week. Havens such as gold have risen, with contracts for August delivery rising 0.8% to $1,283.70 on Thursday. It was gold's highest settlement since June 7.
--Corrie Driebusch contributed to this article.
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(END) Dow Jones Newswires
August 10, 2017 18:19 ET (22:19 GMT)