(Reuters) — NEW YORK (Reuters) – The S&P 500 and the Nasdaq both lost ground on Thursday, with the S&P 500 and the Nasdaq both retreating from record closing highs in a widespread sell-off fueled by concerns about the pace of the US economic recovery. All three major U.S. stock indexes fell as the bond market soared on a flight to safety. The Dow’s economically sensitive transportations fell 3.3 percent on the day, the most since October. Analysts observed, however, that the market remained near historical highs. “We’re still basically at all-time highs,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York, “so I wouldn’t read too much into today’s market behavior.” “The bond market is reflecting that the likelihood of major inflation over a long period of time is very improbable,” Pursche explained, “and that’s the worry that had been driving rates higher until the recent rise.” “We’re in a goldilocks scenario,” Pursche said, with enough growth to keep the economy afloat but not enough to cause the Fed to modify its policies. The minutes from the Federal Reserve’s most recent monetary policy meeting were released on Wednesday, revealing that the central bank does not feel the economy has fully recovered, but that a debate on tightening policy has begun in earnest. The Dow Jones Industrial Average sank 259.86 points, or 0.75 percent, to 34,421.93, the S&P 500 dropped 37.31 points, or 0.86 percent, to 4,320.82, and the Nasdaq Composite slid 105.28 points, or 0.72 percent, to 14,559.79. Traders closed short bets in the bond market as they detected cracks in the US economic recovery. For the ninth day in a row, the yield on the benchmark 10-year US Treasury note decreased. The S&P 500’s 11 major sectors all closed in the red, with financials losing the most ground. Last week, the number of Americans filing first-time applications for unemployment benefits unexpectedly increased to 373,000, indicating that the labor market recovery in the United States is still bumpy. The continuous crackdown by Beijing on U.S.-listed Chinese enterprises exacerbated the risk-averse mindset. China has widened its investigation of U.S.-listed Chinese companies outside the IT industry after its opening salvo against ride-hailing app Didi Global over the weekend. Didi lost 5.9% of its value, while Alibaba Group and Bidu Inc lost 3.9 and 3.7 percent, respectively. Next week is the start of second-quarter reporting for the big banks. According to Refinitiv, analysts estimate aggregate year-over-year profits growth of 65.4 percent for companies in the S&P 500 index, up from the 54 percent growth forecast given at the start of the quarter. “I’d like to see what profit growth looks like over two years rather than one,” Pursche said. “That would be a far better indicator of how good earnings will be.” “One-year data points coming out of the pandemic are so warped that they’re almost irrelevant.” On the NYSE, declining issues outweighed advancing ones by a 3.13-to-1 ratio, while on the Nasdaq, decliners were favored by a 1.98-to-1 ratio. The S&P 500 made 22 new 52-week highs while the Nasdaq Composite made 39 new highs and 148 new lows. On U.S. exchanges, volume was 10.56 billion shares, compared to an average of 10.65 billion over the previous 20 trading days./n
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