New York: US stocks dropped on Wednesday as rising yields on US government debt fueled concern that businesses and consumers could face higher borrowing costs, which could hamper an economic recovery.
The decline was broad-based, with manufacturer 3M Co and International Business Machines Corp among stocks leading a 2% fall on the blue-chip Dow.
The S&P and Nasdaq lost more than 1% each.
“Yields are rising to levels that are becoming very worrisome for the economic outlook,” said William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida.
Bond prices declined in afternoon trading, causing their yields to rise, as concerns about the heavy supply of debt weighed on the market despite a well-received auction of new five-year notes. The yield on US Treasuries is a key benchmark for many lending rates.
The Dow Jones industrial average fell 173.47 points, or 2.05%, to end at 8,300.02. The Standard & Poor’s 500 Index was down 17.27 points, or 1.90%, at 893.06. The Nasdaq Composite Index was down 19.35 points, or 1.11%, at 1,731.08.
The stock market losses follow gains of more than 2% in each of the major indexes on Tuesday, when data on consumer confidence stoked optimism about an economy recovery.
Wednesday’s sell-off in stocks and bonds also surprised some investors as the two tend to move in opposite directions. Treasuries prices typically fall when investors’ appetite for riskier assets, such as stocks, increases.
The price of benchmark 10-year notes was down over 1-16/32 and yielding 3.74% on Wednesday, up nearly 20 basis points in just one day and over 1.25 percentage points in just six weeks.
Shares of 3M fell 3.2% at $56.04, while shares of IBM lost 2% at $102.93, both on the New York Stock Exchange.
Also on the NYSE, shares of General Motors Corp tumbled 20.1% to $1.15 as the automaker faced a failed debt exchange, setting the stage for a bankruptcy filing expected by the end of the month.
Semiconductor stocks had kept the Nasdaq in positive territory for much of the day after SanDisk Corp renewed a chip license with Samsung Electronics. Shares of SanDisk rose 14.3% to $15.52.
Trading was moderate on the NYSE, with about 1.33 billion shares changing hands, below last year’s estimated daily average of 1.49 billion, while on Nasdaq, about 2.17 billion shares traded, below last year’s daily average of 2.28 billion.
Declining stocks outnumbered advancing ones on the NYSE by 7 to 3, while decliners beat advancers on the Nasdaq by about 2 to 1.