Stocks fell sharply on Thursday as interest rates hit new multiyear highs, dampening investor sentiment. The Dow Jones Industrial Average dropped 200.91 points to 26,627.48 as Nike and Home Depot lagged. The 30-stock index dropped 356 points at its lows of the day and posted its worst decline since Aug. 10. The declined 0.8 percent to 2,901.61, notching its worst day since June 25, with communications and tech sectors both sliding more than 1.5 percent. The Nasdaq Composite dropped 1.8 percent — its biggest daily drop since June 25 — to 7,879.51 as Facebook, Netflix and Alphabet all dropped more than 2 percent. The benchmark 10-year Treasury note yield reached its highest level since 2011, breaking above 3.2 percent. "The level of the rates does not concern us," said Steve Chiavarone, portfolio manager at Federated Investors. "That said, moving more than 10 basis points in two days is a different story. Pace matters and it bears watching."

"When you move at this pace in a short amount of time, it's natural for the market to take a breather," Chiavarone said. Dividend-paying stocks sensitive to higher rates fell broadly, including Procter & Gamble, which closed 1.3 percent lower. Bank shares, meanwhile, benefited from the higher rates. J.P. Morgan Chase and Bank of America rose 0.9 percent and 1.4 percent, respectively. The yield surge started on Wednesday after new data showed private payrolls rose by 230,000 in September, which far surpassed the 168,000 jobs in August. Elsewhere on Wednesday, the ISM non-manufacturing index hit its highest level on record. Comments from the top Federal Reserve official also stoked yields higher. On Wednesday, Fed Chair Jerome Powell said that the U.S. central bank had a long way to go before interest rates hit neutral, suggesting to markets that more hikes could be on the horizon.

A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, April 23, 2018. Michael Nagle | Bloomberg | Getty Images