Dow in Triple-Digit Drop as Treasury Yield Fall Sparks Sell-Off

Stocks dropped on Wednesday, with the Dow and the S&P 500 retreating from record highs the day before, waiting for evidence that the economy has bounced back from a weather-plagued first quarter.

The Dow Jones Industrial Average closed unofficially down 101 points, the S&P 500 dropped 8 points and the Nasdaq lost 29 points.

The slump, which halted the Dow's five-day winning run, came as the 10-year Treasury yield dropped to a six-month low, viewed by some as signaling an economic slowdown and a reason to sell riskier assets.

Also, before the market opened, the government reported wholesale prices increased the most in more than 18 months, with producer prices up 0.6 percent in April, as the cost of food and trade services surged, hinting at some inflation pressures at the factory gate..

The 10-year Treasury yield, used in figuring mortgage rates and other consumer loans, fell to a six-month low, dropping 6 basis points to 2.548 percent.

"There is two-fold support, at 2.55 and 2.6, being tested today. Below that you can go back to secondary support at 2.4 percent," said Katie Stockton, chief technical strategist at BTIG. "When I look at bond prices, there are some overbought readings that tell me they should start to stall here."

The 2.6 level is a "magic number for some, as it has been a risk-down, risk-off trigger. There are investors who sell stocks after it gets below 2.6 percent, as it's seen as predicting an economic slowdown," said Art Hogan, chief market strategist at Wunderlich Securities.

Applications for mortgages edged a bit higher last week, as rates fell to their lowest level since November, the Mortgage Bankers Association reported.

The dollar fell against the currencies of major U.S. trading partners and gold prices gained $11.10 to $1,305.90 an ounce.

On Tuesday, the Dow closed at a record high of 16,715.44. The S&P 500 ended marginally ahead at 1,897.45, falling back after rising through the 1,900-point milestone in the morning.