U.S. equities closed lower on Thursday as financials lagged, while social media company Snap had a strong performance in its initial public offering.
The Dow Jones industrial average fell about 100 points, with Caterpillar contributing the most losses. Caterpillar's stock declined more than 4 percent after law enforcement officials searched their offices.
Art Hogan, chief market strategist at Wunderlich Securities, said he is not worried about this decline. "I'd be much more concerned if, after being up 300 points yesterday, we were up 100 points today."
The S&P 500 declined 0.6 percent, with financials declining more than 1 percent. The Nasdaq composite fell 0.7 percent.
"It's only normal. We're at record levels and at some point, it's natural to see some profit taking," said Peter Cardillo, chief market economist at First Standard Financial.
Snap — the parent company for social media platform Snapchat — saw its stock rise more than 40 percent, pushing it well above the $17 a share it priced its IPO. Investors eagerly awaited the IPO as they looked for clues on the health of the technology IPO market.
"Given all the negatives associated with this company, it's going to be one of the more interesting stories we'll see in the next few days," said Maris Ogg, president at Tower Bridge Advisors.
Snap entered public market a day after the three major U.S. stock indexes posted their best session of the year on the back of President Donald Trump's speech to Congress.
"This still is not the major optimism we need for a top," said Chuck Self, chief investment officer at iSectors. "But ... I think there aren't too many more feel-good speeches the president can give without specifics."
Also rising have been expectations for a Federal Reserve rate hike this month, amid a combination of strong economic data and hawkish rhetoric from several key officials.
Most recently, Fed Governor Lael Brainard — a known dove in the central bank's monetary policy committee — said Wednesday evening the Fed could raise rates "soon," citing an improved global economy.
"We are closing in on full employment, inflation is moving gradually toward our target, foreign growth is on more solid footing, and risks to the outlook are as close to balanced as they have been in some time," Brainard said.
Fed Governor Jerome Powell said Thursday that "the case for a rate increase for March has come together."
Market expectations for a March rate hike were around 80 percent, according to the CME Group's FedWatch tool.
"The Fed finally is on board that the economy is fine, ... and that's a positive for Wall Street," said Tower Bridge's Ogg.
In economic news, initial U.S. jobless claims totaled 223,000, well below the expected 243,000. Last week's reading increased 6,000 to 244,000.
"The overall trend in employment continues to be pretty positive," said Eric Freedman, chief investment officer at U.S. Bank Wealth Management. "The real question is whether that will drive more people into the labor market."
U.S. Treasury yields rose, with the two-year note yield hitting a fresh 2009 high, while the 10-year note yield reached its highest level since Feb. 16.
Major U.S. Indexes
The Dow Jones industrial average fell 112.58 points, or 0.53 percent, to close at 21,002.97, with Caterpillar leading decliners and Home Depot the top advancer.
The dropped 14.04 points, or 0.59 percent, to end at 2,381.92, with financials leading nine sectors lower and utilities and telecommunications the only risers.
The Nasdaq composite declined 42.81 points, or 0.73 percent, to close at 5,861.22.
About three stocks declined for every advancer at the New York Stock Exchange, with an exchange volume of 911.06 million and a composite volume of 3.812 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 11.9.
—Reuters contributed to this report.
On tap this week:
Thursday
Earnings: Costco, Autodesk, American Outdoor Brands, Wingstop
7:00 p.m. Cleveland Fed President Loretta Mester
Friday
Earnings: WPP Group
9:45 a.m. Services PMI
10:00 a.m. ISM nonmanufacturing
10:15 a.m. Chicago Fed President Charles Evans, Richmond Fed President Jeffrey Lacker
12:15 p.m. Fed Gov. Jerome Powell
1:00 p.m. Federal Reserve Vice Chairman Stanley Fischer at Monetary Policy Forum
1:00 p.m. Fed Chair Janet Yellen, Executives Club of Chicago on outlook, with Q&A