US stocks have plunged as losses for Cisco Systems hurt technology companies while Wal-Mart declined after its latest quarterly report. Banks also dropped as bond yields and interest rates sank for a second day. It was the second-worst day for stocks this year, which has seen few large declines.
Along with technology companies and retailers, transportation companies slipped and all of the industrial, financial and basic materials companies in the S&P 500 fell. Those sectors tend to struggle when investors are concerned about economic growth, although there were not any specific signs of economic trouble on Thursday.
The Standard & Poor’s 500 index dropped 38.10 points, or 1.5%, to 2,430.01, its lowest close since July 11.
The Dow Jones industrial average tumbled 274.14 points, or 1.2%, to 21,750.73. The Nasdaq composite sank 123.19 points, or 1.9%, to 6,221.91. The Russell 2000 index of smaller-company stocks fell 24.59 points, or 1.8%, to 1,358.94. High-dividend stocks like utilities and real estate companies fared slightly better than the rest of the market, although they still finished lower. About 95% of the companies in the S&P 500 finished with losses.
Bill Northey, chief investment officer at US Bank Wealth Management, said that minutes released on Wednesday from the Federal Reserve’s policy meeting last month marked “a little bit of a change in tone”, and suggested that the central bank is becoming more cautious about raising interest rates. That helped push long-term interest rates in the bond market lower since then.
Lower bond yields tend to hurt banks, because it prevents them from charging higher rates on loans, and benefits high-dividend stocks. Investors were also assessing the state of President Donald Trump’s business-friendly agenda as he continues to face criticism over his comments after the violence in Charlottesville, Virginia, over the weekend.
After he was elected, investors hoped his proposals for tax cuts and infrastructure spending would boost corporate profits. “Most of the agenda … has been a little bit distracted by non-economic factors,” said Mr Northey. Investors also looked for safer investments after a deadly van attack in Barcelona that killed at least 12 people and injured 80.
Despite some shaky reports on Thursday, it has been another strong quarter of corporate earnings.
Per-share profits for S&P 500 companies have grown almost 11% in the second quarter versus the same period a year ago. Profits for energy companies have quadrupled because the price of oil has stabilised, and technology companies have also posted big gains.
Consumer-focused companies have made smaller gains. Analysts, including US Bank’s Mr Northey, mostly expect the stock market to keep rising as long as company profits keep growing.