The catalyst for the move was the lowest consumer price index reading in more than three years, which sent rates lower and investors into small caps and housing-related shares.
The Dow Jones Industrials clung tenaciously to gains of 32.39 points to 39,753.75.
The much-broader index fell 49.37 points to 5,584.54, ending its seven-session win streak.
The NASDAQ dropped 364.04 points to 18,320.58, stepping back from Wednesday’s all-time high.
The consumer price index fell 0.1% last month from May, bringing the annual inflation rate down to 3%. Economists surveyed by Dow Jones had expected a 0.1% monthly increase and a 3.1% annual rate. Core CPI, which excludes food and energy, came in at a 3.3% annual rate, also lower than economists expected.
Odds of a September rate cut rose to greater than 80% based on fed funds futures trading following the CPI data. Traders still see the Fed standing pat at its meeting later this month.
Housing-related shares such as Home Depot and D.R. Horton jumped on the hope lower rates would reignite a stalling housing market.
Industrial stocks like Caterpillar also gained.
Prices for the 10-year Treasury jumped, lowering yields to 4.21% from Wednesday’s 4.28%. Treasury prices and yields move in opposite directions.
Oil prices advanced 99 cents at $83.09 U.S. a barrel.
Gold prices popped $40.80 to $2,420.50