Stocks finished near session lows Wednesday as rising bond yields on government debt raised concern that borrowing costs are going to start going up and tamp down the economic recovery.
The Dow Jones Industrial Average lost 173.47, or 2.1 percent, to close at 8,300.02. The S&P 500 fell 1.9 percent, and the Nasdaq shed 1.1 percent.
Stocks had gotten a quick pop after a report showed existing-home sales rose in April but quickly retreated as the previous day's optimism faded and GM stirred anxiety in the market.
Tech stocks had been up for most of the day but eventually succumbed to the selling pressure.
Today's $35 billion five-year note auctionwas met with solid demand but it wasn't enough to assuage concerns about the growing government debt. This came after the government issued $40 billion of debt on Tuesday.
In the day's economic news: Existing-home sales rose 2.9 percentto an annual rate of 4.68 million in April, up from a downwardly revised 4.55 million pace in March. The median home price dropped 15.4 percent year over year to $170,200. And mortgage applications dropped to their lowest point since early Marchamid the recent jump in interest rates.
In the latest survey from the National Association for Business Economists, nearly 75 percent expect the downturn to end in the third quarter. But they believe unemployment will climb, even if the economy is rebounding.
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General Motors skidded 20 percent as the automaker moved one step closer to Chapter 11but sources close to the matter said they don't expect a bankruptcy filing this week. The deadline is June 1.
Citigroup finished down 1.9 percent after the bank said it has no plans to get rid of its stakes in Chinese and Indian banks, and instead wants to increase lending in those countries. Citi's Asia-Pacific chief told the Financial Times it is in everyone's best interest for the company to growth in a region that is delivering strong profits.
And Bank of America lost 0.6 percent after the company said it's raised nearly $26 billion in capital since the stress tests were announced and that it's "well on its way" to reaching the $33.9 billion buffer set by the Federal Reserve.
Dick Bove, a banking analyst with Rochedale Securities, said there's a shift going on now in the banking sector: The big banks that are more focused on capital markets, trading and investment banking are "doing quite well,"while traditional banks that take deposits or fund real estate "are going to be facing a couple of difficult quarters."
The Nasdaq was also dragged lower, though it put up a good fight amid gains in chip stocks and a couple of hand-held gadget makers.
Apple and Research In Motion rose for a second day after analyst upgrades on the stocks Tuesday amid encouraging outlooks on their product mix and profits.
Chips were some of the biggest percentage gainers on the Nasdaq 100, including Sandisk , Symantec and Infineon , after Sandisk renewed its NAND flash-memory chip license with Samsung Electronics.
And Twitter's co-founder said Tuesday night that the company plans to eventually charge some type of fee for the company's services. They mentioned possible revenue drivers for the online-messaging service, such as banner ads, but did not give many details.
Retailers also succumbed to the selling pressure, though were higher earlier after Oppenheimer initiated coverage on the sector, giving companies like OfficeMax , Lowe's and Bed, Bath & Beyond an "outperform" rating. Bed, Bath & Beyond's price target was set to $42, while the company's shares closed at $28.31 on Tuesday.
Shares of office-products retailer Staples skidded 2.3 percent after the office-supply chain beat analyst estimates but earnings fell sharply from a year earlier.
Autozone beat analysts' earnings target, helped by the recession trend of more Americans opting to repair their existing cars than buy new ones, but it wasn't enough to help the auto-parts retailer's stock, which fell 4.8 percent.
Things have started looking up for some women's apparel chains: Chico's FAS reported its profit jumped 14 percent, helped by cost-cutting measures and a much slower pace of decline in same-store sales than a year ago, and Charming Shoppes , which operates the Lane Bryant and Fashion Bug chains, reported a smaller-than expected loss.
These less-bad results were encouraging, particularly when you consider that women's apparel chains are among the first hit by a slowdown in spending as moms cut back on themselves first.
One analyst, Sterne Agee & Leach's Margaret Whitfield, went so far as to say that Chico's results might represent a turning point.
"Improving trends have been visible at Chico's earlier than planned, with fall expected to provide further improvement," she wrote in a note to clients.
Still to Come:
THURSDAY: Weekly jobless claims; durable goods; new-home sales; weekly crude inventories; Fed's Fisher speaks; Earnings from Costco, Sears and Dell
FRIDAY: GDP; Chicago PMI; University of Michigan/Reuters consumer sentiment; earnings from Tiffany
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