Loss Widens Into New York Close

Wall Street was due for a letdown Tuesday, after gains in nine of the past 11 sessions and a batch of shaky profit forecasts late Monday. The decline, though steep, was relatively tame though, as stocks traded within a narrow range for much of the day.

A significant portion of the action took place in the bond market, as investors sought to park their money in safer investments and ignored the prospect of minimal, or even nonexistent, returns. A $30.0 billion auction of one-month Treasury bills drew robust interest -- a bid-to-cover ratio of 4.2 -- despite a yield of 0.0%. After the auction, the bills were trading at a yield of 0.04%. Three-month T-bills were returning even less, with a yield down to 0.03%, from 0.11% Monday. (See "The Zero Percent Solution.")

The rush into bonds was set off by a day-long fade in U.S. equity markets. The Dow Jones industrial average lost 243 points, or 2.7%, to 8,691; the S&P 500 fell 21 points, or 2.3%, to 889; and the Nasdaq lost 24 points, or 1.6%, to 1,547. (See "Street Slides Back.")

Tech stocks were among the few winners, despite profit and sales warnings from semiconductor companies Texas Instruments (nyse: TXN - news - people ) and Broadcom (nasdaq: BRCM - news - people ), among others. The weaker global economy has crimped demand for their chips, leading to sharply lower fourth-quarter expectations. Texas Instruments gained 4.9%, and Broadcom added 7.0%. The Philadelphia Semiconductor Index, which tracks the pair and their fellow chip makers, rose 5.2%.

Profit-taking likely had some impact on Tuesday's broader decline, but optimism that President-elect Barack Obama's stimulus plans can spend the U.S. back into prosperity took a backseat, as certain early-cycle recovery stocks sank. Companies like FedEx (nyse: FDX - news - people ) and UPS (nyse: UPS - news - people ) are traditionally among the first to bounce back from economic downturns, but a sharply lowered forecast from FedEx Monday sapped investor hopes that such a rebound is already on its way. The parcel shipper said that although fuel pressures have eased, recessions around the world will take a heavy toll in 2009. FedEx shares lost 14.5%; UPS was down 7.0%. The Dow Jones transportation average, which counts both companies as well as airlines, railroads and trucking companies, slid 5.6%. (See "U.S. Recession To Span 2009, OECD Says.")

The rescue plan for Detroit's automotive industry appears to have paused, as lawmakers labor over the details of a proposal to lend General Motors (nyse: GM - news - people ) and Chrysler $15.0 billion of taxpayer money. A drafted plan from Democrats has been met with resistance, but congressmen still appeared confident that a bill will be passed this week. GM shares lost 4.7% Tuesday. Ford Motor (nyse: F - news - people ), which is not presently in danger of insolvency and thus not participating in this initial loan, slipped 4.4%.