NEW YORK – Rising bond yields triggered a selloff on Wall Street Monday as persistent nervousness about the economy and interest rates motivated investors to take profits.
Government bonds tumbled for a fourth straight session, sending market interest rates higher and contributing to the broader decline in stocks. The yield — which moves in an opposite direction from price — on the 10-year Treasury note leaped to a 20-month high of 4.74 percent from 4.69 percent late Friday.
"It seems like the market is obsessing on this bond market fallout, which was somewhat precipitated by the move to raise (interest rates) in Japan," said Jack Ablin, chief investment offier at Harris Private Bank. "A lot of the fuel that has been used to invest in this bond market has been derived from 'easy money' in Japan."
With Japan's economy improving, analysts believe the country's central bank is likely to raise rates soon; the bank's policymakers meet Wednesday and Thursday. U.S. investors fear that rising interest rates in other countries could contribute to more rate hikes domestically.
And with little other economic data to quell anxiety about the economy's health and price inflation, investors felt safer pulling out of the market despite a sharp drop in oil prices and acquisition news at AT&T Corp. (T) and General Motors Corp. (GM).
According to preliminary calculations, the Dow Jones industrial average fell 63.00, or 0.57 percent, to 10,958.59. The Dow slid as much as 92 points shortly after midday.
Monday's sole economic datapoint came from the Commerce Department, which said domestic factory orders declined 4.5 percent in January — the biggest drop in 5 1/2 years, but less than the 5.4 percent dropoff economists had forecast.
Wall Street continued its recent pattern of skittish trading as investors scoured government reports and corporate headlines for any hint of the economy's direction. This week brings data on employment and the U.S. trade deficit, but many will be focused on the Federal Reserve's March 28 meeting and any changes to the central bank's monetary policy.
"I think people were optimistic heading into (Fed Chairman Ben) Bernanke's appointment, thinking he was going to take a softer stance" and ease the Fed's string of interest rate hikes, said Rick Pendergraft, an equity trader for Schaeffer's Investment Research. "But that's not the case, and bonds continue to fall as rates rise."
Oil prices sank on indications that the Organization of Petroleum Exporting Countries won't cut production levels, with a barrel of light crude losing $1.26 to settle at $62.41 on the New York Mercantile Exchange. Elsewhere, the dollar was mostly higher against other major currencies, and gold prices tumbled sharply.
Ablin added that the pullback in crude futures — lower oil prices usually quells Wall Street's fears about energy costs — weighed on the S&P 500, where four oil and gas producers ranked among the day's biggest decliners. Those included ExxonMobil Corp., which dropped $1 to $59.98, and Chevron Corp., down $1.12 at $55.85.
AT&T agreed to swap 1.325 of its shares for each BellSouth share, valuing the Atlanta-based telecommunications firm at an 18 percent premium. Coupled with job cuts, combining the two work forces should save $2 billion annually, AT&T said. BellSouth jumped $3.04 to $34.50, and AT&T slid 97 cents to $27.02.
U.S. telecom stocks advanced on speculation about more acquisition deals in the sector. Sprint Nextel Corp. rose $1.10 to $25.30, Qwest Communications International Inc. gained 25 cents to $6.84 and Alltell Corp. added $2.29 to $66.61.
GM is shedding a 17.4 percent interest in Japan's Suzuki as part of its effort to recover from massive losses and dwindling sales, but the companies said they will continue their partnership. GM rose 60 cents at $19.81.
Late Friday, Research In Motion Ltd. said it would hand NTP Inc. a $612.5 million settlement to end a long-running patent dispute over technology used in its BlackBerry handheld device. RIM surged $10.84 to $82.76.
Citigroup lifted Intel Corp. one notch to "buy," saying its shares already discount much of the bad news at the chip manufacturer, which on Friday cut its projected first-quarter revenue by about $500 million. Intel rose 1 cent to $20.30.
Declining issues outpaced advancers by almost 12 to 5 on the New York Stock Exchange, where volume of 1.66 billion shares topped the 1.57 billion shares changing hands at the same point Friday.
The Russell 2000 index of smaller companies sank 7.28, or 0.99 percent, to 731.16.
Overseas, Japan's Nikkei stock average gained 1.52 percent. Britain's FTSE 100 rose 0.67 percent, Germany's DAX index added 0.57 percent and France's CAC-40 was higher by 0.43 percent.