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Stocks have their biggest drop in more than six weeks

Wall Street
A Wall Street sign near the New York Stock Exchange.
(Jin Lee / Associated Press)

U.S. stocks took their biggest loss in more than six weeks Thursday as investors reacted to mounting evidence that hiring has slowed down. Energy and healthcare companies fell sharply, and so did retailers.

Stocks slumped after ADP, a payroll processing company, said private businesses added fewer jobs in June than investors expected.

Bond prices fell and yields jumped, which hurt companies that pay large dividends, such as major drug companies and real estate investment trusts. Retailers sank after L Brands, the parent company of Victoria’s Secret, reported weak June sales.

The ADP survey was the latest piece of evidence that hiring has slowed in recent months. That has investors worried, because the European Central Bank may start raising rates soon, and rates are already rising in the United States. Higher interest rates tend to slow economic growth.

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Read more: Private-sector job growth slows to still-solid 158,000, ADP says »

“If rates rise meaningfully, it will end up hampering growth expectations,” said Krishna Memani, chief investment officer at Oppenheimer Fund.

The Standard & Poor’s 500 index dropped 22.79 points, or 0.9%, to 2,409.75. The Dow Jones industrial average fell 158.13 points, or 0.7%, to 21,320.04. The Nasdaq composite sank 61.39 points, or 1%, to 6,089.46. The Russell 2000 index of smaller, more U.S.-focused companies slid 19.33 points, or 1.4%, to 1,400.81.

All 61 of the healthcare companies in the S&P 500 lost ground. Biotech drugmaker Amgen fell 1.5% to $171.72. Medical device maker Medtronic declined 1.8% to $87.26.

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Drugmaker Merck skidded 1.7% to $63.10 after it stopped two studies of its cancer drug Keytruda as a treatment for multiple myeloma. Merck said more patients who were treated with Keytruda died, and the Food and Drug Administration halted the studies because the risks of a treatment regimen that included Keytruda outweighed the potential benefits.

L Brands dived 14.1% to $46.49 — by far the largest loss of any S&P 500 company —after it said its sales fell 6% in June as it continues to struggle with the effects of ending its swimwear business. Athletic apparel maker Under Armour fell sank 6.7% to $20.65, Hanesbrands fell 2.8% to $22.53, and Signet Jewelers slid 3.9% to $61.57.

Bond prices skidded. The yield on the 10-year Treasury note rose to 2.36% from 2.33%. Investors sold shares of big-dividend stocks, as the rising bond yields made those stocks less appealing to investors seeking income.

Technology companies, which have been in a swoon in the last month, fell again. Apple slipped 0.9% to $142.73. Intel dropped 2.1% to $33.63. Electronic storage company Seagate Technology retreated 4.4% to $37.29.

Liberty Interactive, the parent company of QVC, will buy the 62% of Home Shopping Network that it didn’t already own for about $2.6 billion in stock. Liberty Interactive said it will value HSN at $40.36 a share in the deal. HSN shares jumped 26.8% to $39.70. Liberty Interactive fell 1.2% to $24.16.

Global leaders arrived in Hamburg, Germany, for the G-20 summit as the U.S. and South Korea continued to respond to North Korea’s recent missile test. On Thursday, South Korean jets and navy ships fired missiles into the ocean during drills, a display of military power two days after North Korea test-launched its first intercontinental ballistic missile.

Read more: The U.S. may have one card to play against North Korea: trade »

The VIX, a measurement of how much volatility investors expect, climbed 13% to 12.53, although that is still a relatively low level.

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Energy companies faltered even though fuel prices increased. Benchmark U.S. crude oil rose 39 cents to $45.52 a barrel in New York. Brent crude, used to price international oils, rose 32 cents to $48.11 a barrel in London.

Wholesale gasoline rose 3 cents to $1.53 a gallon. Heating oil stayed at $1.48 a gallon. Natural gas rose 5 cents to $2.89 per 1,000 cubic feet.

Gold inched up $1.60 to $1,223.30 an ounce. Silver rose 9 cents to $15.98 an ounce. Copper stayed at $2.66 a pound.

The dollar fell to 113.26 yen from 113.35 yen. The euro rose to $1.1423 from $1.1340.

Germany’s DAX fell 0.6%, the CAC 40 in France lost 0.5%, and the British FTSE 100 index went down 0.4%. Japan’s Nikkei 225 fell 0.4%. The Kospi in South Korea edged down less than 0.1%. The Hang Seng of Hong Kong shed 0.2%.


UPDATES:

1:50 p.m.: This article was updated with closing prices, context and analyst comment.

10:45 a.m.: This article was updated with market prices and context.

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This article was originally published at 7 a.m.


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