NEW YORK - Stocks dropped on Thursday as investors get used to idea that the Federal Reserve may raise interest rates next month.
Major indexes fell from the start of trading, following European markets sharply lower, with banks and industrial companies hit the hardest. By the close, Goldman Sachs had dropped 3 percent and Boeing fell 2 percent, the biggest declines in the Dow Jones industrial average. Several commodities sank for a second day, including gold, silver and copper.
With earnings season mostly over and little news to move prices, the focus remained on the suddenly higher odds that the Fed will increase rates in June, as minutes from its last meeting released Wednesday suggest.
"This is all about the Fed," said Bill Strazzullo, chief market strategist at Bell Curve Trading. "Putting June on the table was something few expected."
The Dow fell 91.22 points, or 0.5 percent, to 17,435.40. The S&P 500 lost 7.59 points, or 0.4 percent, to 2,040.04. The Nasdaq composite gave up 26.59 points, or 0.6 percent, to 4,712.53.
At the Fed's meeting in April, policymakers indicated an increase in rates was likely, assuming the economy and labor market continued to strengthen. Higher rates diminish the appeal of high-dividend companies to investors seeking income.
"Many of these stocks already had significant moves up and were due for a correction," said Chief Investment Officer Henry Smith of Haverford Trust. "They have decent yields, but high valuations."
That said, some winners from the previous day became losers as investors scrambled to make sense of the new Fed stance.
Banks climbed after Wednesday's release of the Fed minutes on the expectation they will be able to charge more for loans as rates rise. But investors apparently thought the buying went too far, and sold them heavily on Thursday. The sector dropped 0.9 percent.
Among other stocks making big moves,Walmart Stores jumped nearly 10 percent after reporting surprisingly strong sales and releasing an optimistic outlook. The world's largest retailer rose $6.05 to $69.20.
Urban Outfitters jumped $3.42, or 14 percent, to $28.01 after reporting first-quarter sales that exceeded analyst forecasts.
The solid results from Urban and Wal-Mart contrasts with dour reports from many other retailers in recent weeks. Monsanto rose $3.42, or 3.5 percent, to $100.55 after German drug and chemicals company Bayer confirmed it has entered talks with the U.S.-based seed company.
In Europe, Germany's DAX fell 1.5 percent while the CAC-40 in France fell 0.9 percent. Britain's FTSE 100 index was down 1.8 percent.
The Nikkei 225 index in Tokyo ended flat, while South Korea's Kospi lost 0.5 percent. Hong Kong's Hang Seng shed 0.7 percent.
Benchmark U.S. crude oil fell 3 cents to close $48.16 a barrel in New York. Brent crude, used to price international oils, dropped 12 cents to $48.81 a barrel in London. Wholesale gasoline fell 2 cents to $1.63 a gallon, heating slipped less than a penny to $1.48 a gallon and natural gas rose 4 cents to $2.04 per 1,000 cubic feet.
U.S. government bond prices rose. The yield on the 10-year Treasury note slipped to 1.85 percent from 1.86 percent. In currency trading, the dollar slipped to 109.89 yen from 110 yen and the euro fell to $1.1202 from $1.1229.
In metals markets, gold lost $19.60 to $1,254.80 an ounce, silver gave up 64 cents to $16.49 an ounce and copper fell 2 cents to $2.06 a pound.
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