Closing Bell: Markets Tumble on Fears of Higher Interest Rates

China Factory Workers
Getty Images

Rattled Markets Continue Sell Off for Second Day: Stocks ended Thursday with big losses, as the major indexes each lopped off about 2 percent, driven lower by comments by the Federal Reserve that it may soon begin winding down its bond-buying program.

The Dow Jones industrial average (^DJI) is down 354 points, its worst one-day slide of the year, and biggest percentage drop since November 2011. The S&P 500 (^GSPC) lost 41 -- its biggest drop since 2011 -- and the Nasdaq (^IXIC) sank 79. In addition to fears about the Fed's plan to scale back its stimulus plan, investors were also shaken by data showing China's economy is slowing. A survey of factories showed activity slumping to a nine-month low as demand weakened.

Concerns about the end of the Fed's stimulus efforts prompted selling in the bond markets, sending interest rates up, to a two-year record. Commodities suffered steep losses as well, with gold prices falling by 7 percent, silver by 9, and copper by 3. Light sweet crude oil prices dropped by 3 percent, and natural gas lost 2.

Here's a roundup of other items that made business news Thursday:

  • Amid the broad market sell-off, shares of US Airways (LCC) lost almost 2 percent. A government review, released Wednesday, found that the planned merger of American Airlines and US Airways would result in a greater loss of airline competition than the 2010 merger of United Airlines (UAL) and Continental Airlines.

  • Kroger (KR) raised its outlook for the year after the country's largest traditional supermarket chain reported a fiscal first-quarter profit that beat Wall Street expectations.

  • Rite Aid (RAD) notched its third-straight quarterly profit, as generic drugs and expense reductions continued to help the nation's third largest drugstore chain.

  • Pier 1 Imports (PIR) first-quarter net income rose 14 percent, buoyed by strong full-priced selling of its home decor items.

  • Sales of previously owned homes rose to a 3½-year high in May, according to the National Association of Realtors. The group said that existing home sales advanced 4.2 percent to an annual rate of 5.18 million units, the highest level since November 2009, when a home-buyer tax credit was expiring.

  • The number of Americans filing new claims for unemployment benefits rose more than expected last week, but not enough to signal a material shift from the recent pace of moderate job growth. Initial claims for state unemployment benefits increased 18,000 to a seasonally adjusted 354,000, while analysts had forecast the number to rise to 340,000.

Looking ahead to Friday:

  • CarMax Group (KMX) and Darden Restaurants (DRI) are both scheduled to report earnings before the opening of U.S. markets. Darden, which operates Olive Garden and Red Lobster chains, has suffered from a slowdown in foot traffic, as budget conscious consumers have turned to fast-food chains such as Panera Bread (PNRA) and Chipotle Mexican Grill (CMX) that offer quality food at lower prices. Analysts expect Darden to earn a profit of $1.04 a share on revenue of $2.27 billion in its fiscal fourth quarter. That compares with per-share earnings during the same quarter last year of $1.15.

  • No economic reports are scheduled for the day, but Friday is a quadruple witching day -- the quarterly expiration of stock and index options, as well as stock and index futures. As CNBC reports, though, it's no longer the big deal on Wall Street that it once was.

Compiled from staff and wire reports.