US stocks fall sharply as markets deal with higher rates

Street signs at the intersection of Wall and Broad Streets are shown in lower Manhattan, Wednesday, Oct. 13, 2021. (AP Photo/John Minchillo, File)

A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, Sept. 27, 2022. Stocks were mixed in Asia on Tuesday after closing broadly lower on Wall Street, where the Dow Jones Industrial Average fell into what’s known as a bear market. (AP Photo/Ahn Young-joon)

A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, Sept. 27, 2022. Stocks were mixed in Asia on Tuesday after closing broadly lower on Wall Street, where the Dow Jones Industrial Average fell into what’s known as a bear market. (AP Photo/Ahn Young-joon)

A currency trader passes by screens showing the Korea Composite Stock Price Index (KOSPI), left, and the exchange rate of South Korean won against the U.S. dollar at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, Sept. 27, 2022. Stocks were mixed in Asia on Tuesday after closing broadly lower on Wall Street, where the Dow Jones Industrial Average fell into what’s known as a bear market. (AP Photo/Ahn Young-joon)

Currency traders work at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, Sept. 27, 2022. Stocks were mixed in Asia on Tuesday after closing broadly lower on Wall Street, where the Dow Jones Industrial Average fell into what’s known as a bear market. (AP Photo/Ahn Young-joon)

A trader looks over his cell phone outside the New York Stock Exchange, Wednesday, Sept. 14, 2022, in the financial district of Manhattan in New York. (AP Photo/Mary Altaffer, File)

A person wearing a protective mask walks in front of an electronic stock board showing Japan's Nikkei 225 index at a securities firm Wednesday, Sept. 28, 2022, in Tokyo. Asian shares tumbled Wednesday after a wobbly day ended with mixed results on Wall Street as markets churn over the prospect of a possible recession. (AP Photo/Eugene Hoshiko)

Pedestrians stand in front of an electronic stock board showing Japan's Nikkei 225 index at a securities firm Wednesday, Sept. 28, 2022, in Tokyo. Asian shares tumbled Wednesday after a wobbly day ended with mixed results on Wall Street as markets churn over the prospect of a possible recession. (AP Photo/Eugene Hoshiko)

A person wearing a protective mask walks in front of an electronic stock board showing Japan's Nikkei 225 index at a securities firm Wednesday, Sept. 28, 2022, in Tokyo. Asian shares tumbled Wednesday after a wobbly day ended with mixed results on Wall Street as markets churn over the prospect of a possible recession. (AP Photo/Eugene Hoshiko)

People wearing protective masks stand in front of an electronic stock board showing Japan's Nikkei 225 index at a securities firm Wednesday, Sept. 28, 2022, in Tokyo. Asian shares tumbled Wednesday after a wobbly day ended with mixed results on Wall Street as markets churn over the prospect of a possible recession. (AP Photo/Eugene Hoshiko)

A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Thursday, Sept. 29, 2022. Asian stock markets have followed Wall Street higher after Britain’s central bank moved forcefully to stop a budding financial crisis. (AP Photo/Ahn Young-joon)

A currency trader works at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Thursday, Sept. 29, 2022. Asian stock markets have followed Wall Street higher after Britain’s central bank moved forcefully to stop a budding financial crisis. (AP Photo/Ahn Young-joon)

Currency traders work at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Thursday, Sept. 29, 2022. Asian stock markets have followed Wall Street higher after Britain’s central bank moved forcefully to stop a budding financial crisis. (AP Photo/Ahn Young-joon)

NEW YORK (AP) — Stocks fell sharply in morning trading on Wall Street Thursday as bond yields marched higher and put the squeeze back on markets.

The S&P 500 fell 2.6% as of 10:15 a.m. Eastern. Nearly every stock in the benchmark index lost ground. The Dow Jones Industrial Average fell 597 points, or 2%, to 29,074 and the Nasdaq fell 3.3%.

A day before, stocks jumped and bond yields tumbled in relief after the Bank of England moved forcefully to keep borrowing rates there from spiking further. Wall Street still remains focused on the Federal Reserve and its aggressive rate hikes aimed at slowing the economy and cooling the hottest inflation in four decades.

Bond yields jumped. The yield on the 2-year Treasury, which tends to follow expectations for Federal Reserve action, fell to 4.23% from 4.14% late Wednesday. It is trading at its highest level since 2007. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.80% from 3.73%.

A better-than-expected government report on U.S. layoffs only bolstered expectations that the Fed will keep hiking interest rates and investors are worried that it could hit the brakes on the economy too hard and cause a recession.

The U.S. economy has already contracted for two consecutive quarters, which is one informal measure of a recession. But, the employment market remains strong and consumers continue spending. That has helped bolster the economy and is making it more difficult to get inflation under control.