Rise in bond yields upsets US stock market rally

US stocks have closed broadly lower as investors reacted to a late-afternoon surge in bond yields.

The yields climbed to their highest level in four years after the Federal Reserve released minutes from its latest policy meeting.

The minutes showed bullish sentiment among policymakers, confirming their intention to raise interest rates this year.

The yield on the 10-year Treasury note rose sharply after the minutes came out, touching 2.95%, its highest level since January 2014.

Higher bond yields indicate investors expect more risk of inflation. They also can threaten stock prices by making bonds more appealing versus stocks.

"We're moving back to normal volatility, we're moving back toward normal interest rates, normal inflation," said Erik Davidson, chief investment officer for Wells Fargo Private Bank. "This is what normal looks like."

The Standard & Poor's 500 index fell 14.93 points, or 0.6%, to 2,701.33.

The Dow Jones industrial average lost 166.97 points, or 0.7%, to 24,797.78. The blue chip average had been 300 points higher before the late-afternoon slide.

The Nasdaq gave up 16.08 points, or 0.2%, to 7,218.23. The Russell 2000 index of smaller-company stocks shed most of its gains from earlier in the day. It inched up 1.84 points, or 0.1%, to 1,531.84.

The major stock indexes started the day on pace to recoup some of the market's losses from a day earlier as investors sized up the latest crop of company earnings.

Technology companies, retailers and industrial stocks led the way for much of the day. The rally kicked into a higher gear shortly after the Fed minutes release.

Traders appeared to initially welcome the details in the meeting minutes, which show that a majority of Fed officials at the meeting believed that improving global economic prospects and the effects of recently passed tax cuts had raised the prospect for solid economic growth and for continued interest rate increases in 2018.

The Fed did not raise rates at the January meeting, which occurred before the February stock market plunge and turbulence.

Then bond yields began to climb, and the stock market rally began to evaporate. For a while, bank shares jumped in response to the rise in bond yields, which can benefit banks by allowing them to charge higher interest rates on loans but soon banks stocks also slid into the red.

The yield on the 10-year Treasury, which is used as a benchmark for mortgages and other loans, has been rising in recent months from a recent low of 2.04% in September.

The pick-up in yields has begun to make bonds more attractive as an alternative to stocks, which makes some investors uneasy.