Ten of 11 major S&P sectors were lower led by 1 pct drop in communication services sector

U.S. stocks fell broadly on Thursday, mirroring weakness in the global markets, as government bond yields surged to multi-year highs on robust U.S. economic data and optimistic views from the Federal Reserve.

Ten of the 11 major S&P sectors were lower, led by a 1 per cent drop in the communication services sector, where heavyweights such as Facebook fell 1.2 per cent, and Alphabet and Netflix slid 1.7 per cent each.

Technology stocks declined 1 per cent and were the biggest drag on the markets. Apple fell 0.8 per cent.

The yield on the benchmark 10-year note hit a high of 3.232 per cent, as strong economic data on Wednesday raised expectations that the non-farm payrolls report due out on Friday morning would come in stronger than anticipated.

Fed Chairman Jerome Powell said the economy can expand for "quite some time," which also helped the yield curve steepen to its highest in two months.

That boosted bank stocks, which jumped 1.6 per cent, outstripping the 1.3 per cent rise in the financial sector, which was the only gainer among the 11 major S&P sectors.

"Risks are growing with borrowing cost on the rise and fixed-income markets looking very attractive," said Hussein Sayed, chief market strategist at FXTM.

"With valuations still elevated compared to historic levels, it requires an upbeat earnings season for stocks to maintain their bullish momentum."

Despite the pullback, U.S. stocks are trading near record levels, raising concerns about valuations with the earnings season just around the corner.

At 9:59 a.m. EDT the Dow Jones Industrial Average was down 117.06 points, or 0.44 per cent, at 26,711.33, the S&P 500 was down 11.40 points, or 0.39 per cent, at 2,914.11 and the Nasdaq Composite was down 64.17 points, or 0.80 per cent, at 7,960.92.

"Yields are giving the markets a chance to take a breather at very high levels. I think we will have a defensive, bumpy session going into Friday's unemployment data," said Peter Cardillo, a chief market economist at Spartan Capital Securities in New York.

Among gainers, Constellation Brands shares jumped 4.9 per cent after the Corona beer maker raised its full-year profit forecast and topped Wall Street's estimates for second-quarter sales and profit.

Eli Lilly rose 5 per cent after the company's experimental diabetes drug showed promise in a mid-stage trial.

Snap Inc fell 5.8 per cent after two brokerages raised concerns over Snapchat's declining user trends.

Declining issues outnumbered advancers for a 2.78-to-1 ratio on the NYSE and a 2.03-to-1 ratio on the Nasdaq.

The S&P index recorded 6 new 52-week highs and 11 new lows, while the Nasdaq recorded 13 new highs and 30 new lows. 

(With inputs from agencies.)