The Dow Jones Industrial Average fell on Thursday as bond yields slid and Wall Street continued to weigh recession risks.
The Dow fell 90 points, or 0.3%. The S&P 500 inched 0.1% higher, while the tech-heavy Nasdaq Composite rose 0.2%.
Stocks struggled for direction Thursday as market participants continued to mull over the likelihood and scale of an economic downturn, and as the yield on the 10-year Treasury note dipped to its lowest level in roughly two weeks. Yields move inversely to prices.
Members of the S&P 500 were almost evenly split between gainers and losers. Homebuilder stocks led gains in the S&P 500, as the Home Construction ETF (ITB) gained 3.2% on Thursday and 5.2% this week. Shares of Lennar and D.R. Horton are both up more than 3%.
Energy was the worst performing sector in the S&P 500 as oil prices took a hit. Shares of Schlumberger dropped 8%. Shares of Valero Energy and Phillips 66 each fell 7%.
Airline stocks dragged on the broader market index. Shares of United Airlines dropped 5% as it cut back on flights out of Newark by 12%. Shares of American Airlines fell 3% after the airline said it was dropping service out of four small U.S. cities.
A peek into the broader market index showed more defensive stocks such as consumer staples, utilities, real estate and health care stocks drove outperformance, with each sector up 1%. Consumer staples stocks such as Clorox gained 5%.
Federal Reserve Chair Jerome Powell on Thursday reiterated that the central bank is “strongly committed” to bringing down inflation, as he spoke on monetary policy for a second day on Congress. He also noted that a recession is a “possibility,” a fear that has continued to weigh on Wall Street.
“Definitively, we are going into a recession. How severe that recession is yet to be seen,” said Nick Giacoumakis, president of NEIRG Wealth Management.
“It depends on so many factors that I don’t think really anybody can pinpoint whether it’s going to be a really, really deep, hard recession or it’s going to be a hard landing in a more mild recession.”
UBS is the latest investment bank this week to raise its odds of a recession to 69%, citing lackluster data last week in housing, industrial production and capital goods. Citigroup and Goldman Sachs also increased their recession risk expectations this week.
“We are now watching out for any further negative follow-through or whether we simply hit a local peak and some growth momentum in the hard data resumes,” UBS said in a Thursday note.
On the other hand, a top strategist at JPMorgan on Thursday said he believes the U.S. economy will dodge a recession altogether, with the stock market making back any losses in the back half of the year.
Markets struggled to pull back from the lows of the bear market this week. Still, the major averages are set for a positive week, with the Dow up 1.7%, the S&P 500 gaining 2.4% and the Nasdaq Composite increasing 2.9% week to date.
On Thursday, the Labor Department said U.S. weekly jobless claims fell 2,000 to a seasonally adjusted 229,000 for the week ended June 18, though the labor market remains tight.