Wall Street stocks experienced a downward trend on Thursday as bond yields rallied in the wake of a disappointing Treasury auction. The S&P 500 fell by 0.8%, bringing an end to its eight-day winning streak, while the Dow Jones Industrial Average slipped by 0.6% and the Nasdaq Composite also endured a decline of around 0.9%.

The market turbulence was triggered by a surge in bond yields following a lackluster 1 p.m. ET auction. The 10-year Treasury yield spiked by 10 basis points to reach 4.63%, while the 30-year Treasury yield saw an increase of approximately 12 basis points to 4.77%.

Investors were also keeping an eye on the ongoing earnings season, as a new set of corporate reports made their way to the forefront. Disney shares rose after its after-hours quarterly earnings exceeded expectations, possibly aided by a tentative deal reached between Hollywood studios and striking actors. Other media stocks also experienced gains following the news.

On the other hand, shares in Arm slid as investors digested the chip designer's first post-IPO results, combined with the $6.2 billion quarterly loss posted by its backer, SoftBank.

The recent decline in stocks highlighted the prevailing role of bond yields in the market. Over the past week, stocks had rallied amid falling yields, as investors speculated that the Federal Reserve might refrain from further interest rate hikes. However, with yields rebounding, stocks have once again become susceptible to bond market movements.

Liz Young, the head of investment strategy at SoFi, emphasized the negative correlation between bond yields and stocks, underscoring the impact of yields on the market rally. She added that the biggest challenge for the market was the fluctuations in yields.

While the stock market experienced a setback, the 2024 recession debate took center stage on Wall Street. Wells Fargo economics foresees a recession in 2024 and predicts that the Federal Reserve will implement more interest rate cuts than currently anticipated. On the other hand, Goldman Sachs has a more optimistic outlook, predicting a lower chance of a recession and the possibility of no interest rate cuts.

Federal Reserve Chair Jerome Powell's cautionary comments regarding monetary policy further influenced the market. Powell emphasized that the current monetary policy is in "restrictive territory" and acknowledged the potential need for further policy tightening. Nevertheless, he cautioned against overreacting to short-term economic data.

The decline in stocks was primarily driven by the spike in bond yields, which reasserted their control over the market. The S&P 500's winning streak came to an end, while investors monitored the ongoing impact of corporate earnings. As the bond market remains influential, the stock market's future trajectory will likely depend on the trajectory of bond yields.