U.S. equity indexes close lower

The Dow Jones Industrial Average dropped 703.84 points, or 1.32%, to 52,759.21, the S&P 500 shed 66.82 points, or 0.87%, to 7,641.16, while the Nasdaq Composite declined 263.92 points, or 1.00%, to 26,067.17

The three main U.S. equity indexes closed lower on Thursday as rising Treasury yields dented risk appetite while disappointing results from retail bellwether Walmart soured investors on the consumer sector and rallying oil prices ‌fanned inflation worries.

Walmart shares dropped 9.2% after the traditional retailer missed stock market expectations for quarterly comparable sales as rising gasoline prices had shoppers reining in spending. The report dragged down the S&P 500 consumer staples and consumer discretionary sectors, which were among the weakest of the benchmark’s 11 major industry indexes.

Rival retailers such as Costco, Dollar Tree and Albertsons followed Walmart lower with losses between 1% and 2.6%.

Consumer staples declined 1.93% and was the biggest percentage loser among the S&P 500’s major sectors, followed by healthcare, which dropped 1.93%. The S&P 500 consumer discretionary sector dipped 1.8% with megacap Amazon among its biggest index-point drags. Big percentage decliners in the sector included Royal Caribbean Group and Carnival Corp, which shed more than 4% each as they are sensitive to fuel prices.

The increase in U.S. crude oil 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 labour 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. Stock 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.

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.