The three main U.S. equity indexes closed lower on Thursday as rising Treasury yields dented risk appetite, disappointing results from retail bellwether Walmart soured investors on the consumer sector and rallying oil prices fanned inflation worries.
Walmart WMT.O shares fell sharply after it missed Wall Street expectations for quarterly comparable sales as rising gasoline prices had shoppers reining in spending. The report dragged down the S&P 500 consumer staples index .SPLRCS and consumer discretionary .SPLRCD.
Rival retailers such as Costco COST.O, Dollar Tree DLTR.O and Albertsons ACI.N followed Walmart lower.
The increase in U.S. crude oil CLc1 above $87 compounded concerns about the health of the U.S. consumer, according to Mona Mahajan, head of investment strategy at Edward Jones. She noted that investors were already anxious after recent weaker-than-expected retail sales and labor market data for July.
"There is some question about how resilient the consumer can be with ongoing elevated gas prices and inflationary pressures," Mahajan said.
The strategist also highlighted pressure from rising bond yields on equities. Wall Street indexes had risen on Wednesday after the U.S. Treasury Department said it would spend more than double the expected amount on buying back bonds in a bid to slow a recent surge in yields. On Thursday, however, stocks declined as yields advanced again.
Yields on the 30-year US30YT=RR and 10-year US10YT=RR bonds pared gains briefly after U.S. Treasury Secretary Scott Bessent said he may again increase the volume of Treasury bonds the government will repurchase. But yields resumed their upward trend.
"There are a couple of headwinds that the markets woke up to today," said Mahajan. "One was a resumption in the increase in bond yields across the curve that came despite yesterday's Treasury move ... it reversed very quickly, within 24 hours."
According to preliminary data, the S&P 500 .SPX lost 65.29 points, or 0.85%, to end at 7,642.69 points, while the Nasdaq Composite .IXIC lost 263.28 points, or 1.00%, to 26,067.81. The Dow Jones Industrial Average .DJI fell 681.62 points, or 1.27%, to 52,781.43.
The S&P 500 consumer discretionary sector .SPLRCD was one of the biggest drags on the benchmark index, with megacaps including Amazon AMZN.O and Tesla TSLA.O among its biggest index-point weights. Big percentage decliners included Royal Caribbean Group RCL.N and Carnival Corp CCL.N, which are sensitive to fuel prices.
The S&P 500 energy index .SPNY rose as oil gained for the fifth consecutive session due to stalled U.S.-Iran peace talks and Middle East supply disruptions. Real estate stocks .SPLRCR were also outperforming.
Meanwhile, cryptocurrency-related companies such as Strategy MSTR.O and exchange operator Coinbase Global COIN.O rallied a day after U.S. President Donald Trump called on Congress to pass a crypto bill.
Biotech company Moderna MRNA.O gave up much of its gains from Wednesday, when it surged nearly 177%.
Deere DE.N shares rose after a full-year net income forecast raise from the world's largest farm-equipment manufacturer.
Shares in Coty COTY.N sank after the CoverGirl cosmetics brand owner forecast current-quarter earnings below expectations and withheld its annual outlook, while Advance Auto Parts AAP.N tumbled after issuing a weaker annual sales forecast.
Reuters
