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CNBC ON DIGG

Stocks Slide After Weak 5-Year Auction

Published: Wednesday, 29 Jul 2009 | 2:18 PM ET

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By: Cindy Perman
CNBC.com

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.

Major U.S. Indexes

.DJIA

.NCOMP

.SPX

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 percent in 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 streak Tuesday 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 [MSFT Loading... () ] and Yahoo [YHOO Loading... () ] 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 [GOOG Loading... () ].

FOR INVESTORS

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 Nextel is buying Virgin Mobil USA and Swedish telecom Ericsson is buying Nortel's wireless unit.

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

And ConocoPhillips [COP Loading... () ] reported its profit plunged 76 percent amid 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 [XOM Loading... () ] and Chevron [CVX Loading... () ].