Stocks Slip on Bond Yield Concerns

U.S. stocks slid Thursday afternoon, with financial shares hurt by rising bond yields.

U.S. Treasury prices fell, and yields rose, after stronger-than-expected job market and service sector data. Rising yields can lead to higher borrowing costs, which can diminish corporate profits.

"Stocks are following bonds and yields are going up," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. "If the nonfarm payrolls are up tomorrow, that may further push bond yields since nervous Nellies react to any hint of inflation."

Bond prices and yields move inversely.

The Dow Jones industrial average was down 40.81 points, or 0.30 percent, at 13,536.49. The Standard & Poor's 500 Index was down 3.75 points, or 0.25 percent, at 1,521.12. The Nasdaq Composite Index was up 0.31 point, or 0.01 percent, at 2,645.26.

The benchmark U.S. 10-year treasury note was down 21/32 in price with the yield up to 5.13 percent. Bond prices fell early, following euro zone debt in the morning, and continued to drop after ADP Employer Services reported higher-than-expected U.S. private sector job growth in June.

J.P. Morgan Chase (JPM), Goldman Sachs (GS), Bank of America (BAC) and Wells Fargo *(WFC) declined, with J.P. Morgan Chase down 1 percent at $48.84, Goldman Sachs sliding 1.2 percent to $221.85, Bank of America slipping 0.8 percent at $49.16 and Wells Fargo falling 1.2 percent to $35.25.

The Institute for Supply Management's June services index came in strong, indicating growth in the huge U.S. service sector. As employment grows, the Federal Reserve appears less likely to cut official interest rates in the near future.

Shares of General Motors Corp. (GM) fell 3.5 percent to $36.67, dragging on the Dow, after announcing weak car and truck sales numbers on Tuesday. On Thursday, Bear Stearns cut its recommendation on the stock of GM, the largest U.S. automaker.

General Electric (GE) fell 0.5 percent to $38.51 and AT&T (T) slipped 1 percent to $41.07.

U.S. crude oil rose 32 cents to 71.73 per barrel, fanning concerns about inflation, but were below a 10-month high above $74 after U.S. data showed refiners augmented production to counter summer gasoline demand and crude supplies had risen.

Shares of Hilton Hotels Corp. (HLT) rose 26 percent to $45.42 after U.S. private equity firm Blackstone Group (BX) on Tuesday agreed to buy the company for about $20 billion plus debt.