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Stocks Slide After Weak 5-Year Auction

Stocks declined Wednesday as weak demand for today's Treasury auction and a sharp drop in oil prices dragged on the market. A disappointing durable-goods report didn't help either.

Stocks had been lower all day and slipped further after the weak auction results.

About $39 billion of five-year Treasury notes was auctioned at a high yield of 2.689 percent, short of the 2.63 percent expected. The bid-to-cover ratio was 1.92, the weakest since September. This came after yesterday's two-year auction showed weakness in foreign demand. A 7-year auction is coming tomorrow.

Crude oil fell about $4, trading below $64 a barrel, after a surprise jump in inventories.

Today's economic news poured more water on recovery talk: Orders for durable goods, big-ticket items such as refrigerators and cars, fell 2.5 percentin June amid weak demand for communications and transportation equipment. That was much sharper than 1.3-percent decline in May and the 0.6-percent drop economists had expected.

And mortgage applications fell for the first time in four weeks.

Still to come: The Fed's beige book at 2pm.

This came after the Dow snapped a three-day winning streakTuesday amid a disappointing batch of earnings and a slump in consumer confidence. Still, there were some bullish components to yesterday's session: The Dow ended down just over 11 points, after being down as much as 100 points earlier in the session. And the Nasdaq pulled off a gain of 0.4 percent.

The market has been on a "sugar high" this month while the economy is still floundering, Pimco's Mohamed El-Erian told CNBC. The levels the market reached simply weren't in line with where the economy was at, he said.

The big buzz of the day was that Micro-hoo is finally here: Microsoft and Yahoo have finally reached an agreement! The tech titans brought years of flirtation and bickering to a close with a deal that will combine their search capacities to compete against Google .

This was just the latest wheeling and dealing from the tech sector: IBM agreed to buy SPSS, which makes analytics software, and Agilent Technologies agreed to buy scientific-instrument maker Varian. Plus, a pair of deals in the wireless sector: Sprint Nextelis buying Virgin Mobil USAand Swedish telecom Ericsson is buying Nortel's wireless unit.

In earnings news today, Time Warner reported an 8-percent drop in profit as revenue continued to slide but still beat expectations.

And ConocoPhillips reported its profit plunged 76 percentamid the sharp drop in oil prices but beat analysts' target by a penny.

This came after BP reported Tuesday that its profit was cut in half by the drop in oil prices. Later this week, we'll get results from Dow energy components ExxonMobil and Chevron .

After the bell today, results are due from credit-card provider Visa .

Still to Come:

WEDNESDAY: Fed's beige book; Earnings from Visa after the bell
THURSDAY: Weekly jobless claims; Seven-year Treasury auction results; Earnings from AstraZeneca, ExxonMobil, Colgate-Palmolive, Eastman Kodak, Kellogg, MasterCard, Motorola, Disney, MetLife
FRIDAY: GDP; Chicago PMI; Earnings from Chevron

Send comments to cindy.perman@nbcuni.com.