GLOBAL MARKETS: Stocks drop with tech slide and caution over inflation; yields also fall

Major stock indexes fell sharply on Thursday as technology shares slid and investors were cautious ahead of U.S. inflation data on Friday, while U.S. Treasury yields also dropped.

The Nasdaq ended more than 2% lower, leading losses on Wall Street. The technology sector .SPLRCT slipped 2.7% and was the S&P 500's biggest weight, while more defensive sectors including utilities .SPLRCU ended higher.

Investor confidence has been shaken this month by a series of selloffs in sectors such as software amid concern over artificial intelligence's potential to disrupt certain industries.

"You still have this anti-AI trade going on ... valuations have come down, but I do think that is part of the issue here and continues to plague the market," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. Also, "there is this defensive rotation going," he said.

A surprisingly strong U.S. jobs report on Wednesday eroded near-term rate cut expectations from the Federal Reserve. On Thursday, data showed new applications for U.S. unemployment benefits decreased by less than expected last week.

Expectations the U.S. central bank could have the leeway to cut interest rates had been creeping higher until Wednesday's jobs report.

Investors have been digesting this week's data and weighing the Fed's next steps. The U.S. consumer price index (CPI), set to be released on Friday, is the next key data point.

Treasury yields extended their declines after a robust auction of 30-year bonds. The yield on the benchmark U.S. 10-year Treasury note US10YT=TWEB tumbled 8.1 basis points, its biggest drop since October 10, to 4.102% and is on track for its fifth drop in the past six sessions.

The Dow Jones Industrial Average .DJI fell 669.42 points, or 1.34%, to 49,451.98, the S&P 500 .SPX fell 108.71 points, or 1.57%, to 6,832.76 and the Nasdaq Composite .IXIC fell 469.32 points, or 2.03%, to 22,597.15.

An index of world stocks was sharply lower after hitting record highs this week. MSCI's gauge of stocks across the globe .MIWD00000PUS fell 10.35 points, or 0.98%, to 1,045.22.

The pan-European STOXX 600 index .STOXXfinished 0.5% lower at 618.52 points, with most regional benchmarks also reversing course to close in negative territory.

In currencies, the dollar index was little changed. The index =USD, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.04% to 96.95, with the euro EUR= down 0.03% at $1.1866. Against the Japanese yen JPY=, the dollar weakened 0.23% to 152.91.

The yen has rallied as investors have warmed to the view that the new government in Japan will be fiscally responsible and that Japan's finances may be favorable in the long run.

Oil prices dropped due to falling demand, easing concerns over renewed Middle East conflict and expected increases in supply. U.S. crude CLc1 fell $1.79 to settle at $62.84 a barrel and Brent LCOc1 dropped $1.88 to settle at $67.52.

Gold prices fell to a near one-week low, with spot gold XAU= last down about 2.8% at $4,934.57 an ounce.

-Caroline Valetkevitch/Reuters