Stocks slump most in week; Treasury bonds gain

U.S. stocks fell and Treasurys gained as investors mulled whether the levels of stimulus being provided is enough amid a gradual economic recovery.

The benchmark S&P 500 dropped for a second day, though it found some support after bouncing off its 50-day moving average. Technology shares were the biggest decliners, with Apple Inc., Facebook Inc. and Microsoft Corp. weighing on the Nasdaq Composite.

Investors snapped up long-term Treasurys, capturing a brief spike higher in yields following the Federal Reserve's policy decision Wednesday. Although Fed Chair Jerome Powell said the central bank will remain accommodative after relaxing its inflation policy, he didn't provide clarity as to just how high it can go and for how long. That, along with the lack of fresh details on the Fed's plans for its bond-buying program, sparked long-end demand.

"It remains to be seen how the long-term projection of near zero interest rates and more free-flying inflation will actually play out for the economy," said Mike Loewengart, managing director of investment strategy at E*Trade Financial Corp. "The somewhat dour tone from the Fed could weigh on investors."

Meanwhile, the number of Americans applying for jobless benefits resumed its decline. Continuing claims also fell by almost 1 million in the week ended Sept. 5.

All eyes remain on central bankers and their role in propping up economies still reeling from the coronavirus shock. Bank of England policymakers said they were exploring negative rates to counter ongoing risks to the labor market after voting unanimously to maintain their key interest rate at 0.1%, causing the pound to slide to an intraday low and pushing gilts higher. Earlier the Bank of Japan kept its asset-purchases and bond-yield targets in place.

Recent flare-ups of the virus and a fading post-pandemic recovery have renewed calls for more fiscal support as well. Fed officials have stressed in recent weeks that the U.S. recovery is highly dependent on the nation's ability to better contain infections, and that further fiscal stimulus is likely needed to support jobs and incomes.

"Consumer sentiment data and the employment picture still reflect a fragile economic recovery," said Matt Miskin, co-chief investment strategist at John Hancock Investments. "Powell did not bring up the need for further fiscal support multiple times yesterday just for the sake of it. Monetary policy has its limits, the lack of fiscal policy support leaves significant risks to this recovery."

Elsewhere, crude oil climbed above $40 a barrel. Natural gas prices tumbled the most in almost two years after a bigger than expected increase in stockpiles revived concerns that the glut of the fuel will increase. Gold declined.

These are some of the main moves in markets:

Stocks

The S&P 500 Index declined 0.8% to 3,357.02 as of 4:02 p.m. EDT, the largest drop in a week.

The Dow Jones industrial average fell 0.5% to 27,901.71, the first retreat in a week.

The Nasdaq Composite Index fell 1.3% to 10,910.28, the largest drop in a week.

The Nasdaq 100 Index sank 1.5% to 11,080.95, the lowest in more than a week.

The Stoxx Europe 600 Index decreased 0.5% to 371.23, the first retreat in a week.

Currencies

The Bloomberg Dollar Spot Index sank 0.3% to 1,160.88, its fifth straight decline and the biggest dip in more than a week.

The British pound was little changed at $1.2971, the strongest in more than a week.

The euro increased 0.3% to $1.1847.

The Japanese yen appreciated 0.2% to 104.70 per dollar, the strongest in about six months.

Bonds

The yield on 10-year Treasurys fell one basis point to 0.69%, the biggest drop in a week.

The yield on 30-year Treasurys declined three basis points to 1.43%, the largest drop in a week.

Germany's 10-year yield fell one basis point to -0.49%, the lowest in more than a week.

Britain's 10-year yield dipped three basis points to 0.185%.

Commodities

West Texas Intermediate crude climbed 2.3% to $41.08 a barrel, the highest in two weeks.

Gold weakened 0.6% to $1,948.03 an ounce, the largest decrease in two weeks.

Natural gas fell 12.1% to $1.99 per mmBtu, the lowest in almost seven weeks.