UKX FTSE 100 Index

By Sue Chang, MarketWatch , Ryan Vlastelica

Nasdaq tumbles by triple digits

U.S. stocks traded sharply lower Thursday as investors fretted over a rise in bond yields, which threatened to end a five-day rally for the Dow Jones Industrial Average.

Both the S&P 500 and the Dow were on track for their worst sessions since late June and the Nasdaq tumbled by triple digits.

Where are the major benchmarks trading?

The Dow Jones Industrial Average slumped 318 points, or 1.2%, to 26,509. The S&P 500 index lost 35 points, or 1.2%, to 2,889 and the Nasdaq Composite Index skidded 170 points to 7,854, a drop of 2.1% that had some indications of panic-like selling (http://www.marketwatch.com/story/nasdaq-stocks-see-panic-like-selling-but-nyse-stocks-seeing-good-buying-interest-on-dips-2018-10-04).

Read:Here are the stocks most sensitive to soaring bond yields (http://www.marketwatch.com/story/here-are-the-stocks-most-sensitive-to-soaring-bond-yields-2018-10-04)

The Cboe Volatility Index , meanwhile, jumped 31% to 15.22 but the so-called "fear index" remains well below its long-term average between 19 and 20. The index tends to rise as stocks fall.

The day's losses were widespread, with nine of the 11 primary S&P 500 sectors in negative territory. Among the biggest decliners were the communication-services group--where losses were driven by Facebook (FB), Netflix (NFLX), and Google-parent Alphabet (GOOGL) (GOOGL), all of which fell more than 1%--and the technology sector. Apple Inc. (AAPL) fell 1.8% while Microsoft Corp. (MSFT) was down 2.8%.

What's driving markets?

The yield on the 10-year U.S. Treasury note rose 4.4 basis points to 3.20%, hitting its highest level since 2011. This comes a day after its largest one-day rise since November 2016. Investors dumped bonds as economic indicators point to continued strength in the economy.

Read:3 reasons why U.S. government bond yields are soaring (http://www.marketwatch.com/story/3-reasons-why-us-government-bond-yields-are-soaring-2018-10-03)

A higher yield can damp enthusiasm for stocks, as it offers higher returns for income-seeking investors, without the risk or volatility that can come with equities.

In the latest economic data, jobless claims fell by 8,000 in the latest week (http://www.marketwatch.com/story/jobless-claims-fall-by-8000-to-207000-in-wake-of-hurricane-florence-2018-10-04) and hover near multidecade lows. The report comes after Wednesday's strong reading on private-sector employment, and a day before the closely watched September jobs report. Separately, factory orders rose 2.3% in August, a tick above the 2.2% that had been expected.

Don't miss:Fed Chairman Powell has cost stock-market investors $1.5 trillion in 2018, say JPMorgan analysts (http://www.marketwatch.com/story/fed-chairman-powell-has-cost-stock-market-investors-15-trillion-in-2018-say-jpmorgan-analysts-2018-10-03) (http://www.marketwatch.com/story/fed-chairman-powell-has-cost-stock-market-investors-15-trillion-in-2018-say-jpmorgan-analysts-2018-10-03)

What are market analysts saying?

"We've had really strong data and commentary from Fed officials, which is bullish for equities, but that comes with the side effect of having people think we should expect more inflation and interest-rate increases, which in turn is a negative for equities," said Randy Frederick, vice president of trading and derivatives for Charles Schwab. "The long-term uptrend remains intact, but given these issues, there's limited room for upside in the short-term, especially since markets are at or near records."

David Madden, market analyst at CMC Markets UK, said investors are worried that rising U.S. government bond yields could trigger an emerging market crisis. Many developing countries borrow in dollars and higher Treasury yields will likely exacerbate their debt burden.

"The U.S. 10-year Treasury note yield jumped to a level not seen since 2011, and this could put pressure on emerging market economies, which might trigger a global selloff," he said.

What stocks are in focus?

Cloudera Inc. (CLDR) jumped 9.5% and Hortonworks Inc. (HDP) surged 9.8% after the two companies late Wednesday announced an agreement to merge (http://www.marketwatch.com/story/cloudera-hortonworks-stock-both-soar-on-merger-announcement-2018-10-03).

Shares of Barnes & Noble Inc.(BKS) soared 22% after the bookstore chain said its board of directors has decided to enter a formal review process (http://www.marketwatch.com/story/barnes-noble-stock-rallies-22-as-companys-board-explores-sale-2018-10-03) to evaluate "strategic alternatives" for the company.

Eli Lilly & Co. (LLY) shares rose 2.8% after the drug company announced positive results from a trial of its diabetes treatment (http://www.marketwatch.com/story/eli-lillys-stock-surges-toward-record-after-positive-trials-for-diabetes-treatments-2018-10-04).

Shares of Arrowhead Pharmaceuticals Inc. (ARWR) sank 17% after it entered a $3.7 billion license and cooperation agreement with Janssen Pharmaceuticals Inc. to develop and commercialize its ARO-HBV treatment for chronic hepatitis B.

Pier 1 Imports Inc. (PIR) shares fell 1% after the retailer late Wednesday reported a second-quarter loss that widened from the prior year and was wider than expected, along with revenue that missed expectations (http://www.marketwatch.com/story/pier-1-imports-shares-slide-as-retailer-posts-disappointing-quarterly-results-2018-10-03).

Where are other markets trading?

Shares in Asia ended lower (http://www.marketwatch.com/story/asian-markets-sink-led-by-losses-in-hong-kong-south-korea-2018-10-03), with Hong Kong's Hang Seng Index down 1.7%. Major European indexes also finished lower (http://www.marketwatch.com/story/european-stocks-slide-as-rising-bond-yields-buffett-equity-benchmarks-2018-10-04).

Crude-oil prices pulled back sharply (http://www.marketwatch.com/story/oil-pulls-back-from-4-year-high-as-impact-from-iran-sanctions-scrutinized-2018-10-04) from a four-year high, while gold was slightly lower on the day. The U.S. dollar index edged up (http://www.marketwatch.com/story/dollar-rally-stalls-as-global-yields-move-higher-2018-10-04) 0.1%.

(END) Dow Jones Newswires

October 04, 2018 13:41 ET (17:41 GMT)

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