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Stocks fell on Thursday and bond yields dropped as anxiety over the bumpy economic recovery roiled financial markets.
The S&P 500 slid as much 1.6 percent before recovering some ground. By the end of the trading session, the index was down about 0.9 percent, a more modest drop but one that stood out in comparison to the relatively calm tone in financial markets in recent weeks.
Before Thursday, stocks had fallen only twice in the 13 previous trading days, with the S&P 500 in record territory much of that time. Thursday’s drop was Wall Street’s worst showing since mid-June.
But investors in the bond market have been signaling their concerns about the economy for days. Yields on 10-year Treasury notes, a benchmark for borrowing costs across the economy and a measure of the outlook for growth, have fallen sharply since late June.
Yields fall when traders buy bonds, something they do when they’re worried about the economy or other factors that could threaten riskier investments. On Thursday, the yield on the 10-year note fell further, dropping as low as 1.25 percent before recovering somewhat to 1.30 percent.
“There’s growing concern on how robust the economic recovery will be,” said Edward Moya, a senior market analyst at Oanda, a foreign currency exchange. “The virus spread in other countries is starting to suggest we won’t have a strong second half of the year.”
It wasn’t long ago that investors were instead worried about the prospect that the economy would overheat as nations emerged from lockdowns. Key measures of inflation have become important data points for financial markets because persistent price increases could prompt the Federal Reserve to start to back away from policies that support the economy.
Though the Fed has said it is far from that point, minutes from its mid-June meeting that were released on Wednesday showed that the central bank’s officials are growing divided about the path forward.
On Thursday, the Labor Department reported that new state unemployment claims rose slightly last week to 370,000, compared with the 350,000 expected by economists.
“It exemplifies the argument we’re nowhere near substantial further progress for the economy to warrant the Fed’s removal of accommodation,” Mr. Moya said.
The rise of the highly contagious Delta variant of the coronavirus has served as a reminder that the pandemic remains a threat to both public health and the economy, even though infections and deaths in the United States are near their lowest levels since testing became widely available.
Last month, World Health Organization officials urged even fully vaccinated people to continue wearing masks and taking other precautions, and officials in Los Angeles County reinstated a mask policy, recommending everyone wear masks indoors in public places.
On Wednesday, the Centers for Disease Control and Prevention estimated that the Delta variant now accounted for more than half of new infections in the United States, and on Thursday, Olympic organizers said they would bar spectators from most events after the declaration of a new state of emergency in Tokyo, a stark reminder how quickly the pandemic can derail plans.
Shares of companies that are geared toward the economy were all lower. JPMorgan Chase dropped 1.7 percent along with shares of many other banks, while the mining company Freeport-McMoRan fell 4.2 percent and the railroad operator CSX fell 6.2 percent.
Concerns about the pandemic were also evident in the volatile trading in travel and tourism companies, which were volatile on Thursday. Carnival Corp. fell 1.5 percent, while Norwegian Cruise Line dropped 1 percent.
Investors have also been weary of China’s latest crackdown on tech companies. Policymakers in Beijing declared this week that they would aim to strengthen oversight of Chinese companies, such as the ride-hailing app Didi, that listed their shares on exchanges overseas.
“That raises a concern more broadly about what China might do with its global platform in equities and it poses a risk if they were to force even more Chinese firms to pull back from the global market,” John Canavan, the lead analyst at Oxford Economics, said. “It could further exacerbate some of the equity woes.”
On Thursday, Chinese tech stocks fell sharply. The ride-hailing app Didi fell 5.8 percent, while the truck-hailing app Full Truck Alliance fell 10.9 percent.
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