Stocks dip as GM gets closer to bankruptcy
The stock market put its rally back on hold as investors worried about rising borrowing costs.
The Dow Jones industrial average fell almost 175 points Wednesday, erasing most of the previous day’s advance as a jump in Treasury bond yields fanned concerns that higher interest rates would sap strength from the economy.
The benchmark 10-year Treasury note’s yield shot up to 3.69%, its highest level since November, from 3.49% late Tuesday as concerns intensified about the huge amount of debt the government is selling to fund its bailout programs. The Treasury is auctioning about $100 billion in debt this week.
Along with increasing the government’s own borrowing costs, rising Treasury yields could hamper an economic recovery because they influence rates on mortgages and other kinds of loans. Higher home-loan rates could delay a recovery in the battered housing market.
The Dow posted its fifth decline in six trading days, falling 173.47 points, or 2.1%, to 8,300.02 after rising 196 points Tuesday.
The Standard & Poor’s 500 index fell 17.27 points, or 1.9%, to 893.06, and the tech-laden Nasdaq composite index fell 19.35 points, or 1.1%, to 1,731.08.
On Tuesday, stocks soared after an upbeat reading on consumer confidence lifted hopes for an economic rebound in the second half of the year.
The Dow is still 27% above the 12-year low it reached in early March, but 41% below the record high it set in October 2007.
The financial sector lost ground Wednesday after the Federal Deposit Insurance Corp. said the number of troubled banks jumped to the highest level in 15 years during the first quarter. An index of major bank stocks sank 3.8%.
S&P; 500 companies that sell nonessential products to consumers fell 2.7%. Zale plunged 20% after the jeweler posted a wider quarterly loss.
An S&P; gauge of 13 housing stocks slumped 2.9% after the National Assn. of Realtors said the number of unsold previously occupied homes rose 9% from March to April to a level indicating a 10-month supply at the current sales pace.
Agricultural products maker Monsanto fell 6.3% after saying it expected its fiscal 2009 earnings to come in at the low end of its forecast range.
Flash-memory maker SanDisk jumped 14% after it renewed a licensing agreement with South Korea’s Samsung Electronics.
Oil prices surged to their highest level since early November despite the worries about interest rates and the economy.
