U.S. stocks slid on Thursday as investors took profits from the technology sector's recent surge, while analyst downgrades hurt telecoms and a tepid response to a government bond auction raised fears about public finances.
Bank stocks also succumbed to profit-taking, a day after leaked results from so-called stress tests suggested that most U.S. banks were healthier than previously thought. Results of the test are expected at 5 p.m. EDT (2100 GMT) after the bell on Thursday.
Investors worried that poor demand for government debt could raise the cost of capital and hamper chances of a U.S. economic recovery.
U.S. debt prices slid, sending the 30-year Treasury bond yield to its highest since November.
The auction is big news because now it's showing that maybe the Chinese don't want our bonds. If the cost of capital for the United States becomes more expensive, then the recession is going to take that much longer to get out of, said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
Shares of International Business Machines Corp
The semiconductor index <.SOXX> fell 6 percent, but is still up 33.6 percent since the broader market's 12-year low of March 9. Tech has provided a crucial underpinning of the market's run-up since then, along with bank stocks.
The Dow Jones industrial average <.DJI> dropped 102.43 points, or 1.2 percent, to 8,409.85. The Standard & Poor's 500 Index <.SPX> slid 12.14 points, or 1.32 percent, to 907.39. The Nasdaq Composite Index <.IXIC> fell 42.86 points, or 2.44 percent, to 1,716.24.
The $14 billion Treasury bond auction met below-average demand from investors, who bid aggressively to force the government to pay a higher yield as it pushed ahead with plans to help finance its burgeoning budget deficit with more longer-term debt.
Other tech casualties were Hewlett-Packard
Among banks stocks, shares of Citigroup
Other standout casualties were homebuilders, with the Dow Jones home construction index <.DJUSHB> off 6 percent. Shares of big manufacturers were also hit hard, with Caterpillar Inc
At Thursday's closing, the S&P 500 showed a gain of 34.1 percent from the March 9 low, paring back from the rise of 36 percent it had through Wednesday session.
But Wal-Mart Stores Inc
Johnson & Johnson