- The Washington Times - Thursday, June 11, 2009

Stocks fell moderately Wednesday after the government sold $19 billion in 10-year Treasury notes in a relatively weak auction. There were plenty of bidders, but the government had to lure them with a higher yield than the market anticipated.

The Dow Jones Industrial Average slipped 24 points.

Investors are concerned the government’s debt load is growing so large that it will lead to higher inflation and soaring interest rates. Higher interest rates could hamper the economy’s recovery by raising borrowing costs for consumers, while higher inflation could also discourage them from spending.

The dollar has already been weakening in recent months, contributing to a sharp rebound in commodity prices. The price of oil briefly surpassed $71 a barrel on Wednesday, its highest level this year.

Jeffrey Frankel, president of Stuart Frankel & Co., said the Treasury auction rattled some traders. But he added that cautious pullbacks in a stock market that went straight up for three consecutive months are not necessarily a bad thing.

“You have some people reading the history books, thinking, ‘This looks familiar to what the books tell us happened during the Great Depression,’ ” he said. “Then you have others that are saying, ‘Don’t sell America short.’ ”

“It’s healthy that you have a split camp of people who still have fears and still worry, and people who think America’s great and we’re going higher,” he said.

Data from the Federal Reserve on regional economies did little to help stocks. The central bank reported in what’s known as its Beige Book that five of 12 U.S. regions said the economy’s “downward trend is showing signs of moderating.”

The Dow fell 24.04, or 0.3 percent, to 8,739.02 after sliding as much as 123 points after the release of the Treasury auction results in the early afternoon.

The Standard & Poor’s 500 index fell 3.28, or 0.4 percent, to 939.15. The Nasdaq Composite Index fell 7.05, or 0.4 percent, to 1,853.08.

The Dow has been waffling around 8,700 this month, just below where it started the year, after its massive three-month rebound from 12-year lows reached in early March.

“We’re going to need to have more positive news on the economic front to make another push higher,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research.

In other trading, the Russell 2000 index of smaller companies fell 4.22, or 0.8 percent, to 523.71.

About three stocks fell for every two that rose on the New York Stock Exchange, where volume came to 1.2 billion shares, compared with 1.1 billion Tuesday.

Overseas, Japan’s Nikkei stock average rose 2.1 percent. Britain’s FTSE 100 gained 0.7 percent, Germany’s DAX index rose 1.1 percent, and France’s CAC-40 rose 0.6 percent.

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