Wall Street declines as its big rally cools some more

Stocks slipped Thursday as Wall Street's red-hot rally for the year cooled a bit more.

The S&P 500 fell 11.50, or 0.3%, to 4,501.89 for its third straight loss after setting a 16-month high. The Dow Jones Industrial Average dropped 66.63, or 0.2%, to 35,215.89, and the Nasdaq composite dipped 13.73, or 0.1%, to 13,959.72.

A day earlier, U.S. stocks tumbled to their worst loss in months. While the drop came after Fitch Ratings downgraded the U.S. government's credit rating, analysts say they expect the move to mean little for financial markets. U.S. Treasury debt is the cornerstone of the global financial system, but the downgrade likely won't push any investors to dump theirs.

The big questions remain whether the economy will avoid a recession, how corporate profits will do and where interest rates are heading. Hanging over them all is whether the stock market's big run this year was overdone, as critics suggest.

Treasury yields in the bond market continued to march higher Thursday, putting more pressure on the stock market. The yield on the 10-year Treasury rose to 4.18% from 4.09% late Wednesday and from 2.75% a year ago.

Higher yields mean bonds are paying more in interest, which can peel buyers away from stocks.

They also make borrowing more expensive for companies, crimping their profits.

Yields have climbed as the economy has remained remarkably resilient despite much higher interest rates meant to drive down inflation. The U.S. government also continues to borrow heavily.

In the latest reading on the economy, a report showed that the number of workers applying for unemployment benefits rose last week but remains relatively low.