Shares of financial companies sagged under the pressure of falling bond yields and the threat of Hurricane Irma, weighing on major stock indexes.
The Dow Jones Industrial Average fell 46 points, or 0.2%, to 21762. The S&P 500 declined 0.1%, while the Nasdaq Composite slipped less than 0.1%.
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Declines in Treasury yields, along with concerns about the storm's potential impact on Florida as it battered islands in the Caribbean, helped erase stocks' early gains following the European Central Bank's decision to leave monetary policy unchanged while reaffirming the resilience of the eurozone economy.
The euro rose following the ECB's announcement, further compounding the central bank's dilemma of a rapidly appreciating currency.
Shares of financial companies in the S&P 500 tumbled 1.8%, with insurance companies Everest Re Group and XL Group among the index's biggest laggards.
"People are looking at what happened with [Hurricane] Harvey and the type of companies affected to see what will get hit now," said Paul Karrlsson-Willis, head of global equity sales and trading at Cabrera Capital, adding that insurers and orange producers will be closely watched.
Hurricane Harvey is already projected to disrupt measures of the U.S. economy in the weeks and months ahead. Jobless claims surged in a report on Thursday, while forecasters in The Wall Street Journal's survey of economists expect the growth rate of gross domestic product to fall by about 0.3 percentage points in the third quarter.
Some money managers expect Irma to further hurt some economic indicators in the near term, which could dampen expectations the Federal Reserve will raise interest rates later this year.
"That will probably change how the Fed approaches its December meeting," said Tom Wright, director of equities at JMP Securities.
U.S. government-bond prices strengthened, sending the yield on the 10-year Treasury note down to 2.053%, according to Tradeweb, from 2.108% on Wednesday.
That contributed to the pressure on shares of financial companies, since lower yields can crimp lenders' profits. The KBW Nasdaq Bank Index of large U.S. lenders fell 2.2%.
While the ECB avoided making any pronouncements on when it would scale back its bond-purchasing program, the central bank's president, Mario Draghi, said the euro's volatility "represents a source of uncertainty" that requires monitoring.
The euro -- up 14% against the dollar this year -- has damped eurozone inflation by lowering import prices and led the ECB to cut its inflation forecast slightly on Thursday. However, investors appeared to focus on the ECB's upgrade of its growth forecasts and Mr. Draghi's revelation that policy makers had finally discussed the future of the bond-buying program as a group, which helped send the euro up 0.7% to $1.1999.
The Stoxx Europe 600 rose 0.3%.
Seamus Mac Gorain, a portfolio manager at J.P. Morgan Asset Management, said there is a limit to how far the ECB can talk down the currency given the strong growth in the eurozone and the fact that the euro doesn't look overly expensive based on traditional currency valuation models.
Still, the euro's rapid appreciation in recent months will mean the ECB won't "want it to go too much higher from here," he added.
Elsewhere in currency markets, the WSJ Dollar Index, which measures the dollar against a basket of 16 other currencies, fell 0.6%.
-- Kenan Machado contributed to this article.
Write to Christopher Whittall at email@example.com and Michael Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
September 07, 2017 13:17 ET (17:17 GMT)