Weak Treasury auction sends stock prices lower

NEW YORK (AP) — Weak demand at a Treasury bond auction touched off worries in the stock market Thursday about the government’s ability to raise funds to fight the recession.

The government had to pay greater interest than expected in a sale of 30-year Treasurys. That is worrisome to traders because it could signal that it will become harder for Washington to finance its ambitious economic recovery plans. The higher interest rates also could push up costs for borrowing in areas like mortgages.

Investors also pocketed some gains after the strong rally in stocks this week and ahead of the government’s April employment report on Friday. Investors were jittery ahead of the formal release of results from the government’s “stress tests” of bank balance sheets, which came out later Thursday.

Major stocks market indicators slid more than 1 percent, including the Dow Jones industrial average, which lost 102 points after gaining nearly the same amount Wednesday.

Stocks fell almost from the start of trading as investors quickly looked past upbeat reports on the job market and retail sales as traders asked “What’s next?” and cut back their holdings after what had been a 4.8 percent gain this week in the Standard & Poor’s 500 index.

Analysts said investors are already starting to expect economic numbers that aren’t as bad as they had been and are now looking for the next catalyst that could take stocks higher after a surge of more than 30 percent from 12-year lows in early March.

“This is a market that is starting to bake in a lot of positive surprises,” said Craig Peckham, a market strategist at Jefferies & Co.

Technology shares posted the biggest losses Thursday after security software maker Symantec Corp. posted weaker-than-expected results. Retailers were mixed even after many of them, including Wal-Mart Stores Inc., reported better-than-expected April sales.

“The fact that we’re seeing the retailers sell off on these positive surprises suggests the bar has been raised on what companies need to do to take stocks higher,” Peckham said.