U.S. stocks opened sharply lower Thursday as yields on government bonds extended their decline with investors shying away from bets on a blistering economic recovery and rising inflation.

What are major indexes doing?

The Dow Jones Industrial Average

dropped 388.77 points, or 1.1%, to 34,293.02.

The S&P 500

declined 55.58 points, or 1.3%, to 4,302.55.

The Nasdaq Composite

fell 216.29 points, or 1.5%, to trade at 14,448.78.

On Wednesday, stocks edged higher, with the S&P 500 rising 0.3% and the Nasdaq Composite eking out a gain of just over 1 point — enough to lift both indexes to record finishes. The Dow rose 104.42 points, or 0.3%, to end at 34,681.79.

What’s driving the market?

U.S. stock benchmarks were in retreat after the latest in a string of all-time highs, with a weaker tone Thursday across global equities attributed in part to worries that the recovery from the COVID-19 pandemic could be slowed by persistent supply bottlenecks and the spread of the delta variant of the coronavirus that causes COVID-19.

Ahead of the bell, the government said initial jobless claims rose to 373,000 from an upwardly revised 371,000 in the seven days ended July 3. Economists had looked for claims to drop to 350,000.

A sharp drop in the yield on the 10-year Treasury note

remains front and center. The 10-year yield remains down 3.4 basis points at 1.285% after dipping below 1.25%, its lowest since February. The fall in long-dated yields has significantly flattened the yield curve, a plot of yields across Treasury maturities.

The curve flattening “has already led market participants to sell cyclical stocks in favor of large-cap growth stocks, essentially reversing the rotation into value stocks experienced since September,” said Steven Ricchiuto, chief U.S. economist at Mizuho Securities, in a note.

Analysts have scrambled to explain the Treasury rally, which has taken the 10-year yield from above 1.40% at the beginning of the month, with explanations ranging from a loss of faith in the economic recovery to global appetite for yield to technical factors that have seen a flush out of speculative bets on rising yields.

“The overriding concern being reflected in the bond market is that peak growth has been reached, and the benefits from fiscal policy are starting to fade. Recent data has been disappointing. The Citigroup Economic Surprise Index is at its lowest level since February,” said Sophie Griffiths, analyst at Oanda, in a note.

Read: Why is the 10-year Treasury yield plunging to the lowest since February? Government debt is Wall Street’s new meme asset, says investor

Analysts said concerns over the delta variant of the coronavirus were also weighing on sentiment. Japan on Thursday was set to place Tokyo under a state of emergency that would continue through the Olympics, underlining fears a COVID-19 surge will multiply during the Games.

On Wednesday minutes of the Federal Reserve’s June policy meeting confirmed that policy makers began discussing when it would be appropriate to consider the slowdown of monthly bond purchases. It also showed that policy makers largely thought conditions needed to warrant a tapering had yet to be achieved.

Which companies are in focus?

Electric car maker Tesla Inc.

on Thursday unveiled the Standard Range (SR) Model Y on its China website, with a starting price of ¥276,000 ($42,589), which takes into account government subsidies and reduces it from ¥291,840. Delivery of the autos will begin in August, according to the website. Tesla shares were down 1.8%.

Attorneys general in 36 states and the District of Columbia sued Alphabet Inc.’s


Google late Wednesday, claiming violations of antitrust law. Shares were down more than 1%.

Shares of WD-40 Co.

rose 2.6% after the maintenance and cleaning products company delivered results and an outlook late Wednesday that beat Wall Street expectations.

Semiconductor stocks fell on concerns about the speed of the global economic recovery. Micron

 , Nvidia

 , Qualcomm

 were all off by more than 2%.

What are other markets doing?

The ICE U.S. Dollar Index
a measure of the currency against six major rivals, was down 0.3%.

Oil futures remained under pressure, with the U.S. benchmark

down 0.2% at $72.06 a barrel. Gold

found support, edging up 0.6%, with falling Treasury yields seen reducing the opportunity cost of holding nonyielding assets.

European equities were down sharply, with the Stoxx Europe 600

and London’s FTSE 100

both down 1.8%.

In Asia, the Shanghai Composite

fell 0.8%, Hong Kong’s Hang Seng Index

shed 2.9% and Japan’s Nikkei 225

dropped 0.9%.

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