U.S. stock markets closed lower on Thursday following  spike in government bond yields. Market participants also digested a series of mixed economic data. Rate hike by UK central bank was a concern too. All the three major stock indexes ended in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 0.2% to close at 35,215.89. Notably, 15 components of the 30-stock index ended in positive territory, while 15 in negative zone. The major loser of the blue-chip index was Salesforce Inc. (CRM Quick QuoteCRM - Free Report) after dropping 2.2% in stock price. Salesforce currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The tech-heavy Nasdaq Composite finished at 13,959.72, dropping 0.1% due to weak performance of large-cap technology stocks. The S&P 500 fell 0.3% to end at 4,501.89, marking three consecutive days of decline.

Eight out of 11 broad sectors of the benchmark ended in positive zone while three finished in negative territory. The Real Estate Select Sector SPDR (XLRE) and the Utilities Select Sector SPDR (XLU) tumbled 1.4% and 2.3%, respectively. However, the Energy Select Sector SPDR (XLE) rose1%.

The fear-gauge CBOE Volatility Index (VIX) was down 1.1% to 15.92. In intraday trading, the fear gauge touched 17.59, its highest since Jun 13. A total of 12.08 billion shares were traded on Thursday, higher than the last 20-session average of 10.5 billion. Decliners outnumbered decliners on the NYSE by a 1.84-to-1 ratio. On Nasdaq, a 1.20-to-1 ratio favored declining issues.

Spike in U.S. Treasury Yield

On Aug 1, Fitch Ratings downgraded the U.S long-term foreign currency issuer default rating to AA+ from AAA. The agency cited “expected fiscal deterioration over the next three years.” Consequently, the yield on the benchmark 10-Year U.S. Treasury spiked to 4.198%, its highest level since November 2022. The yield on the long-term 30-Year U.S. Treasury Note touched 4.3%, its highest level since October 2022.

Bank of England Hikes Rate

The Bank of England hiked the main interest rate by 25 basis points to 5.25%, marking the highest level in 15 years. The central bank has raised the benchmark lending rate in 14th consecutive MPC meetings. The MPC said that it will “ensure that Bank Rate is sufficiently restrictive for sufficiently long to return inflation to the 2% target.” This is a clear indication that tight monetary policy will continue.

Economic Data

New orders for manufactured goods (both durable and non-durable) climbed 2.3% in June, beating the consensus estimate of 2.2%. May’s data was revised upward from 0.3% to 0.4%. Shipment of manufactured increased 0.1% in June. New orders for manufactured durable goods increased 4.6% while new orders for manufactured nondurable goods rose 0.1%.

The Department of Labor reported that unit labor cost increased 1.6% in second-quarter 2023 compared with 4.2% in first quarter. Nonfarm productivity surged 3.7% in second quarter, beating the consensus estimate of 2.3%. Notably, nonfarm productivity contracted 2.1% in first quarter.

The Institute of Supply Management reported that its services index for the month of July came in at 52.7, compared with the consensus estimate of 53.3. The metric for June was 53.9. Notably, any reading above 50 indicates expansion of services activities.

Weekly jobless claims increased by 6,000 to 227,000 for the week ended Jul 29, in line with the consensus estimate. Continuing claims — people who already received government unemployment benefit and run a week behind the headline number — came in at 1.7 million for the week ended Jul 22. This compares to a revised 1.679 million in the prior week.