The stock market’s massive rally since its March 2020 bottom has been supported by the notion that Covid would be defeated, and the economy would return to something that looks like normal, while governments and central banks filled the gap with ample stimulus. That thesis has played out—big time. Now, markets are looking to what comes next.

That’s likely to be a slowing of economic growth from its torrid rebound pace, while the next monetary policy move will be a tightening. Talk of “peak growth” and “peak stimulus” is gaining steam. And after a 40% surge in the S&P 500 from its Covid-selloff bottom last March, it doesn’t take a whole lot to inspire some profit-taking in stocks.

“Equity markets globally are getting slammed this morning as stocks have started to drink the fear of the bond markets that reflation has peaked,” NatAlliance Securities’ Andrew Brenner wrote on Thursday. “Is this the start of an equity correction that we thought would start in the middle of August? …We don’t think so but it is ugly this morning.”

The declines were broad on Thursday, with all 11 sectors in the S&P 500 in the red. Cyclically oriented materials and financials were among the hardest hit, but technology and consumer discretionary stocks were also declining. Defensive utilities and consumer staples sectors were the best off in the index on Thursday.

Bonds, meanwhile, saw their prices rise and yields fall, extending a recent streak. The 10-year Treasury yield had slumped 0.03 percentage point, to 1.29%, on Thursday. That yield had been nearly 1.75% in late March.

“While stocks have been on a tear, hitting all-time highs last month, the mood in the markets is starting to sour,” wrote Oanda’s Sophie Griffiths.

The declines were spread across all major markets. The Stoxx Europe 600 was down almost 2% after ending Wednesday at its second-highest level ever. Germany’s DAX lost 2% and the U.K.’s FTSE 100 was down 1.9%.

The Nikkei 225 lost 0.9% in Tokyo, where investors considered the news that the Olympics will likely be held without spectators. Japan declared a new state of emergency until late August due to the spread of coronavirus. Hong Kong’s Hang Seng lost nearly 3%, with tech stocks including Alibaba and Tencent retreating amid China’s tightening regulatory regime

It was also the first opportunity for overseas investors to react to the latest minutes coming from the U.S. Federal Open Market Committee, which showed division among officials regarding the timing for reducing the rate of bond purchases. That didn’t come as a surprise—officials have been airing their disparate views in public since the meeting last month.

“Overall, the Fed is struggling to form a consensus on the direction of the asset purchase program,” said Tim Duy, chief U.S. economist at SGH Macro Advisors.

The latest U.S. jobless claims—out Thursday morning—didn’t do much to change the narrative either. The number of Americans filing for first-time unemployment insurance rose to 373,000, up from 371,000 the previous week and above expectations for a drop to 350,000.

Charles Schwab (ticker: SCHW) dropped 2.1% after getting downgraded to Neutral from Buy at Goldman Sachs.

Coinbase Global (COIN) dropped 6.1% as the price of Bitcoin fell below $32,500.

D.R. Horton  (DHI) lost 4.1% after getting cut to Sector Perform from Outperform at RBC Capital.

Dish Network  (DISH) declined 1.1% despite getting upgraded to Hold from Reduce at HSBC.

Freeport-McMoRan  (FCX) slumped 5.4% after getting cut to Underweight from Equal Weight at Barclays.

Overstock.com  (OSTK) gained 1.7% after being initiated at Buy at Needham and getting added to the firm’s conviction list.

Write to Ben Levisohn at ben.levisohn@barrons.com