US STOCKS-Nasdaq on track to confirm correction territory after Powell comments

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* Weekly jobless claims rise less than expected
* Nasdaq wipes out all gains in 2021
* Indexes down: Dow 1.2%, S&P 1.4%, Nasdaq 2.1%

(Adds comment, details; updates prices)
By Shashank Nayar and Medha Singh
March 4 (Reuters) - U.S. stocks slumped on Thursday with the
Nasdaq on track to confirm correction territory, as Federal
Reserve Chair Jerome Powell's remarks failed to soothe market
worries about a jump in longer-term U.S. bond yields.
The benchmark 10-year Treasury yield US10YT=RR spiked to
1.533% as Powell did not comment on any changes in Fed's asset
purchases to tackle the jump. It still held below last week's
one-year high of 1.614%.
Investors were expecting that the Fed might introduce
Operation Twist in which the central bank shifts its bond
purchases to the long end of the yield curve from the shorter
end. "The market has been worried about the rise in long-term
interest rates and the Fed chairman in his commentary didn't
really push back towards this increase in rates and the market
took it as a signal that yields could rise further which is what
has happened," said Scott Brown, chief economist at Raymond
James in Florida.
Wall Street's fear gauge .VIX touched a near one-week high
at 28.16 points.
The Nasdaq wiped out all of its year-to-date gains and was
down about 10% from its record closing high on Feb. 12. If it
closes at these levels, it would confirm correction territory.
In contrast, the Dow has fallen about 3.6% from its all-time
closing peak on Feb. 24, while the S&P 500 is down 5% from its
record close on Feb. 12.
"There is a fork in the road for markets which is best
served with a correction ... which is what we are seeing now as
concerns of lofty tech valuations and elevated yield levels
affect sentiment," said Jason Ader, chief executive officer at
SpringOwl Asset Management.
Latest data showed the number of Americans filing for
jobless benefits rose last week, likely boosted by brutal winter
storms in the densely populated South, though the labor market
outlook is improving amid declining new COVID-19 cases.
The crucial monthly payrolls report is expected on Friday.
Wall Street's main indexes fell in the past two sessions as
a spike in U.S. bond yields pressured high-flying tech stocks
while economy-linked stocks outperformed on hopes of a new round
of fiscal aid and vaccinations.
The energy sector .SPNY touched a one-year high on the
back of higher oil prices. Apple Inc AAPL.O , Tesla Inc
TSLA.O and PayPal Holdings Inc PYPL.O were among the top
drags on the S&P 500. O/R
Tech stocks are particularly sensitive to rising yields
because their value rests heavily on future earnings, which are
discounted more deeply when bond returns go up.
At 1:32 p.m. ET, the Dow Jones Industrial Average .DJI
fell 391.55 points, or 1.23%, to 30,878.54, the S&P 500 .SPX
lost 52.81 points, or 1.38%, to 3,766.91 and the Nasdaq
Composite .IXIC lost 278.05 points, or 2.14%, to 12,719.71.
Declining issues outnumbered advancers by a 3.5-to-1 ratio
on the NYSE and by a 5.8-to-1 ratio on the Nasdaq.
The S&P 500 posted 28 new 52-week highs and no new lows,
while the Nasdaq recorded 197 new highs and 291 new lows.