Dow and S&P 500 dip as yields drop, Wall Street weighs recession fears

The Dow Jones Industrial Average and the S&P 500 fell on Thursday as bond yields fell and Wall Street continued to assess the risks of a recession.

The Dow Jones Industrial Average fell 124 points, or 0.4%. The S&P 500 was down 0.2%, while the heavy Nasdaq Composite was up 0.2%.

The moves come as the yield on the 10-year Treasury fell to its lowest level in nearly two weeks, below 3.1%, as investors continued to ponder the possibility and scale of an economic downturn. Yields move inversely to prices.

Federal Reserve Chairman Jerome Powell reiterated Thursday that the central bank is “strongly committed” to lowering inflation, as he spoke about monetary policy for a second day in Congress. He also noted that a recession is a “possibility,” a fear that has continued to weigh on Wall Street.

“Categorically, we are entering a recession. How severe is this recession we haven’t seen yet,” said Nick Giacomakis, head of NEIRG wealth management.

“It depends on so many factors that I don’t really think anyone can tell if it’s going to be a really, really hard recession, or it’s going to be a hard landing in a milder recession.”

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UBS is the latest investment bank this week to raise the odds of a recession to 69%, citing weak data last week in housing, industrial production and capital goods. Citigroup and Goldman Sachs also raised their forecasts for recession risks this week.

“We are now watching for any further negative follow-up or whether we simply hit a local peak and resume some growth momentum in tough data,” UBS said in a note Thursday.

On the other hand, a senior strategist at JPMorgan said Thursday that he believes the US economy will avoid a recession altogether, with the stock market incurring any losses in the second half of the year.

The energy sector was the worst performer in the S&P 500 as oil prices took a hit. Brent crude futures fell 1.5 percent to $110.18 a barrel. US West Texas Intermediate crude futures fell 1.6% to $104.45 a barrel.

Schlumberger shares fell 8%. Valero Energy and Phillips 66 shares fell 7% each.

Airlines shares fell in the broader market index. Shares of United Airlines fell 5% as it cut flights from Newark by 12%. Shares of American Airlines fell 3 percent after the airline said it would drop service from four small US cities.

Meanwhile, homebuilders stocks gained, with the Home Builders Index (ITB) up 3.4% on Thursday and 5.4% this week. Shares of Lenar and DR Horton are up 3% and 4%, respectively.

Stocks wobbled on Thursday as they struggled to pull back from bear market lows. However, the major averages are set for a positive week, with the Dow Jones up 1%, the S&P 500 up 2% and the Nasdaq Composite up 2% week to date.

The Labor Department said Thursday that weekly jobless claims in the United States fell 2,000 to a seasonally adjusted 229,000 for the week ending June 18, although the labor market remains tight.

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