US Stocks Lose Steam as Bond Yields Rise

US stocks slide Thursday, erasing their gains from earlier in the day, as a selloff in government bonds picked up steam.

The S&P 500 fell 0.4%. The Nasdaq Composite dropped 0.7%, adding to losses from Wednesday after a selloff in Netflix shares led the technology sector lower. The Dow Jones Industrial Average was down 0.1%.

Investors this year have had to weigh signs of solid economic activity against fears that the Federal Reserve will tighten monetary policy too quickly, potentially tripping up markets. Many credit stocks’ strong run over the past few years in part to extraordinary levels of monetary support from central banks. With the Fed preparing to raise rates several more times this year and unwind its $9 trillion balance sheet, some money managers worry risky assets will struggle to hold onto the momentum of prior years.

Anxiety over the Fed’s projected rate-increase path has already helped fuel selling in Treasurys. The yield on the 10-year US Treasury note jumped to 2.939% Thursday, compared with 2.836% Wednesday and 1.496% at the end of 2021.

The renewed push higher in bond yields put fresh pressure on the stock market. Higher rates can put pressure on stocks because they reduce the premium that investors get from holding riskier assets instead of Treasurys.

Advanced Micro Devices slipped 2.8%, while Salesforce lost 2.3% and HP declined 1.7%.

Some analysts say they believe even as the Fed normalizes monetary policy, US stocks still have room to run, given the strength of the economy. So far, about 80% of the S&P 500 companies that have posted earnings results for the latest quarter have beaten analysts’ expectations, according to FactSet.

“Despite so many negative macro headlines, like the Russia-Ukraine conflict, inflation, and China’s zero-COVID policy, US corporate profits continue to be resilient,” said Michael Arone, chief investment strategist for SPDR at State Street Global Advisors.

Beyond earnings, data on employment has shown the US labor market is on solid footing, Mr. Arone said.

“I don’t think the rise in rates will matter too much until you see economic data fall over,” he said.

Tesla shares jumped 6.1% after the electric-vehicle maker reported $3.3 billion in quarterly profits late Wednesday, its highest profit to date.

AT&T shares added 4.5% after reporting stronger-than-expected growth in its core wireless business.

Airline stocks also rallied. American Airlines Group shares rose 4% after the carrier reported that revenue more than doubled in the first quarter. United Airlines, which also benefited from a surge in post-lockdown travel, rose 10%.

Meanwhile, oil prices rose on signs that Russian oil production is falling and Europe is moving toward putting an end to imports of Russian crude. US crude oil prices added 1.6% to $103.81 a barrel. Germany said Wednesday it would stop buying Russian oil by the end of the year.

Traders worked on the floor of the New York Stock Exchange last week.


Photo:

BRENDAN MCDERMID/REUTERS

Overseas stock markets were mixed. The Stoxx Europe 600 rose 0.3%, led by shares of travel, leisure and construction companies. France’s CAC 40 gained 1.4% after a pre-election debate in which incumbent, pro-business President Emmanuel Macron was judged by polls to have beaten far-right challenger Marine Le Pen.

In China, shares came under pressure on concerns that Covid-19 shutdowns were slowing growth in the world’s second-largest economy. The Shanghai Composite Index lost 2.3%. Hong Kong’s Hang Seng Index fell 1.3% and Japan’s Nikkei 225 added 1.2%.

Write to Joe Wallace at joe.wallace@wsj.com and Akane Otani at akane.otani@wsj.com

Corrections & Amplifications
Weekly jobless claims data are due at 8:30 am ET. An earlier version of this article incorrectly said they were due at 10:30 am ET. (Corrected on April 21.)

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