Dow sheds 220 points, S&P 500 snaps win streak after Fed’s Powell says higher rates may be needed

How stock finished

• Dow Jones Industrial Average
  DJIA
  shed 220.33 points, or 0.7%, ending at 33,891.94, after touching a session low of 33,859.77 in afternoon trade.

• S&P 500
  SPX
  fell 35.43 points, or 0.8%, closing at 4,347.35.

• The Nasdaq Composite
  COMP
  closed 128.97 points lower, or 0.9%, at 13,521.45.

On Wednesday, the S&P 500 rose for the eighth straight session, while the Nasdaq Composite rose for the ninth. For both indexes, it was the longest winning streak since November 2021, Dow Jones Market Data show.

What drove markets

U.S. stocks closed near the session lows Thursday after a $24 billion sale of 30-year Treasury bonds went poorly.

Stocks initially opened higher, but gave up further ground after Fed Chair Jerome Powell, in a speech at the International Monetary Fund, suggested interest rates might not be high enough yet to bring inflation sustainably down to the central bank’s 2% annual target.

Powell said the Fed’s 2% goal “is not assured: inflation has given us a few head fakes.”

Recent volatility in longer duration Treasurys has been credited with driving the action in stocks lately. “It’s still a focus and is probably what is taking a little bit of the steam away from the equity rally today,” said James Ragan, director of wealth management Research at D.A. Davidson, in an phone interview.

“It’s the fear that those higher rates out on the curve will act as a brake on the economy,” Ragan said.

In response to a question at the IMF, Powell said there probably are a half-dozen explanations for why longer-duration bond yields have shot higher. “I think we really don’t know,” he said.

But Powell also said the central bank currently wasn’t trying to make decisions based on the move higher in long-term yields.

Richmond Fed President Thomas Barkin said at a separate event Thursday that it remains to be seen if more monetary policy tightening is needed. He also played down the role of moves in long-term bond yields when it comes to informing the Fed’s monetary policy decisions.

Before Thursday’s selloff, the S&P 500 gained 6.5% in its eight-day winning streak, coinciding with the 10-year Treasury yield’s
BX:TMUBMUSD10Y
retreat from a 16-year peak around 5% to as low as 4.5%. The yield was back up to 4.6% Thursday as stocks slumped.

The selloff derail the S&P 500’s latest run at a ninth-straight day in the green.

In One Chart: Rare stock-market event? Here’s how many times the S&P 500 has seen a 9-day winning streak in the last 95 years.

Oil
CL00,
-0.46%
prices and the U.S. dollar
DXY
also climbed Thursday. “We entered November on the back foot and clearly the biggest headwinds for stocks were rising Treasury rates, a stronger dollar and rising energy prices,” said Art Hogan, chief market strategist at B. Riley Wealth, in an interview with MarketWatch. “All three of those have now reversed.”

Outside of the major indexes, the Russell 2000
RUT,
a gauge of small-cap stocks traded in the U.S., closed 1.6% lower.

In economic data, investors parsed the latest report on the number of Americans filing for jobless benefits. It showed that initial jobless claims fell by 3,000 to 217,000 last week, suggesting that layoffs aren’t on the rise, even as the pace of job creation slowed in October, according to data released last week.

Companies in focus

• Walt Disney Co.’s
  DIS,
  +6.91%
  stock jumped 6.9% after the media company reported a spike in streaming customers and better-than-expected earnings.

• AstraZeneca PLC
  AZN,
  +0.88%
  shares rose0.9% after the Anglo-Swedish drugmaker upped its earnings forecast for 2023 following a surge in sales of cancer medicines.

• Lyft Inc.
  LYFT,
  -5.97%
  on Wednesday reported third-quarter results that beat Wall Street’s estimates and forecast fourth-quarter sales growth that was better than expected. But shares of the ride-hailing platform fell 6% Thursday.

• AMC Entertainment Holdings Inc.’s
  AMC,
  -13.68%
  shares were 13.7% lower after it reported strong third-quarter results. The movie theater chain and meme stock darling swung to profit and reported positive net income for the second straight quarter after market close Wednesday.

—Jamie Chisholm contributed reporting