Weak demand at a Treasury bond auction touched off worries in the stock market Thursday about the government’s ability to raise funds to fight the recession.
NEW YORK (AP) — Weak demand at a Treasury bond auction touched off worries in the stock market Thursday about the government’s ability to raise funds to fight the recession.
The government had to pay greater interest than expected in a sale of 30-year Treasurys. That is worrisome to traders because it could signal that it will become harder for Washington to finance its ambitious economic recovery plans. The higher interest rates also could push up costs for borrowing in areas like mortgages.
Investors also pocketed gains after strong rally in stocks this week and ahead of the government’s April employment report on Friday. Investors were jittery ahead of the formal release of results from the government’s “stress tests” of bank balance sheets later Thursday.
Major stocks market indicators slid more than 1 percent, including the Dow Jones industrial average which lost 102 points after gaining nearly the same amount Wednesday.
Stocks fell almost from the start of trading as investors quickly looked past upbeat reports on the job market and retail sales as traders asked “What’s next?” and cut back their holdings following what had been a 4.8 percent gain this week in the Standard & Poor’s 500 index.
Analysts said investors are already starting to expect economic numbers that aren’t as bad as they had been and are now looking for the next catalyst that could take stocks higher after a surge of more than 30 percent from 12-year lows in early March.
“This is a market that is starting to bake in a lot of positive surprises,” said Craig Peckham, a market strategist at Jefferies & Co.
According to preliminary calculations, the Dow fell 102.43, or 1.2 percent, to 8,409.85 a day after the blue chips jumped 102 points to close above the 8,500 level for the first time in four months. The index is down 4.2 percent for the year.
The S&P 500 index fell 12.14, or 1.3 percent, to 907.39, and the Nasdaq composite index fell 42.86, or 2.4 percent, to 1,716.24.