US stocks dropped yesterday as rising yields on US government debt fuelled concern that businesses and consumers could face higher borrowing costs, which could hamper an economic recovery.<br /><br />The decline was broad-based, with manufacturer <strong>3M</strong> and <strong>International Business Machines</strong> among stocks leading a 2 per cent fall on the blue-chip Dow.<br /><br />The S&P and Nasdaq lost more than 1 per cent each.<br /><br />“Yields are rising to levels that are becoming very worrisome for the economic outlook,” said William Sullivan, chief economist at JVB Financial Group.<br /><br />Bond prices declined in afternoon trading, causing their yields to rise, as concerns about the heavy supply of debt weighed on the market despite a well-received auction of new five-year notes. The yield on US Treasuries is a key benchmark for many lending rates.<br /><br />The Dow Jones industrial average fell 173.47 points, or 2.05 per cent, to end at 8,300.02. The Standard & Poor’s 500 Index was down 17.27 points, or 1.90 per cent, at 893.06. The Nasdaq Composite Index was down 19.35 points, or 1.11 per cent, at 1,731.08.<br /><br />The stock market losses follow gains of more than 2 per cent in each of the major indexes on Tuesday, when data on consumer confidence stoked optimism about an economy recovery.<br /><br />Wednesday’s sell-off in stocks and bonds also surprised some investors as the two tend to move in opposite directions. Treasuries prices typically fall when investors’ appetite for riskier assets, such as stocks , increases.<br /><br />The price of benchmark 10-year notes was down over 1-16/32 and yielding 3.74 per cent on Wednesday, up nearly 20 basis points in just one day and over 1.25 percentage points in just six weeks.<br /><br />Shares of 3M fell 3.2 per cent at $56.04, while shares of <strong>IBM</strong> lost 2 per cent at $102.93, both on the New York Stock Exchange.<br /><br />Also on the NYSE, shares of <strong>General Motors</strong> tumbled 20.1 per cent to $1.15 as the automaker faced a failed debt exchange, setting the stage for a bankruptcy filing expected by the end of the month.