GLOBAL MARKETS-Tech stocks sink Wall Street; U.S. bonds rally

Thu Apr 10, 2014 12:39pm EDT

* Greece makes successful return to bond markets

* U.S. jobless claims report unexpectedly strong

* Dollar gets little lift from jobs data (Recasts lead, adds context on technology selloff, updates quote)

By Michael Connor

NEW YORK, April 10 (Reuters) - U.S. technology stocks slumped on Thursday, resuming recent weakness in shares that had led U.S. stocks higher for more than a year, while Greece's much-heralded return to the bond market buoyed euro zone debt.

The benchmark 10-year U.S. Treasury yield fell to its lowest level since the beginning of March as investors shifted out of equities. Technology and biotech shares led the way lower, as investors continue to question whether high-flying momentum stocks like TripAdvisor are overvalued.

European equity markets, which started the day stronger, fell in tandem with Wall Street.

The equity market dropped even as the Labor Department reported that U.S. weekly jobless claims fell to a seven-year low, indicating ongoing recovery in the labor market and the economy.

"The rotation is out of some of the higher-growth, higher-momentum areas of the market, and until we get earnings visibility, we could see protracted weakness," said Eric Teal, chief investment officer at First Citizens Bancshares Inc in Raleigh, North Carolina, which manages $3.5 billion.

On Wednesday, U.S. stocks bounced after dovish commentary from the Federal Reserve's minutes from its March meeting. That helped shares in Asia rally overnight and bolstered European equities for a time.

Wall Street's Dow Jones industrial average was down 140.19 points, or 0.85 percent, at 16,296.99. The Standard & Poor's 500 Index was down 23.21 points, or 1.24 percent, at 1,848.97. The Nasdaq Composite Index was down 94.30 points, or 2.25 percent, at 4,089.60.

The S&P technology sector fell 1.6 percent while the Nasdaq biotechnology index plunged 4.6 percent.

Greece staged a triumphant return to the bond market just two years after its default placed it at the center of the euro zone debt crisis.

Greece drew solid demand at its five-year bond sale, which aimed to raise 3 billion euros and offered a yield of 4.95 percent, beating Athens' 5 percent target. It had been expected to draw in U.S. investors including hedge funds.

Greece's deputy prime minister, Evangelos Venizelos, said the sale was at least eight times oversubscribed. Investors looked to the deal as further evidence that the euro zone's economic recovery is gathering pace.

"It's not a particularly cheap deal for them, but they are on the right track and it shows the debt crisis has eased significantly," said Commerzbank strategist Michael Leister.

The global MSCI All-Country World index was down 0.5 percent. The FTSEurofirst 300 index of leading European companies lost 0.5 percent, shedding earlier gains.

European shares felt the sting of weak economic data, with Italy reporting softer-than-expected industrial output while a discounted share placement by Iberdrola triggered a selloff in Spanish utilities.

U.S. Treasuries rallied on the weakness in stocks ahead of an auction of $13 billion auction of 30-year bonds. The 10-year Treasury note rose 14/32 to drop its yield to 2.639 percent.

The Federal Reserve on Thursday bought $3.223 billion of Treasuries maturing June 2018 through December 2018 as part of its economic stimulus program.

Initial U.S. jobless claims declined by 32,000 to a seasonally adjusted 300,000 for the week ended April 5.

"It's collaborating with the other signals we have been seeing, which is the jobs market is slowly improving," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.

The Fed minutes took a toll on the dollar on Thursday, sending the greenback to three-week lows against the yen and the Swiss franc, as investors who had positioned for a gradual tightening in monetary policy were driven to reverse course.

The dollar has fallen versus the yen in four of the last five trading days. Against the Swiss franc, the dollar weakened for a fourth straight session.

"The minutes were laced with dovish undertones," said Scott Smith, senior FX trader and market analyst, at Cambridge Mercantile Group in Calgary, sending "market participants into a 'risk-on' buying frenzy."

The dollar was down 0.3 percent versus the yen at 101.64 yen, having fallen to 101.39, its lowest level since March 19. The dollar slipped against the Swiss franc to 0.8768 franc, its lowest in three weeks.

A drop in China's exports stoked concerns about demand in the world's second-biggest economy and pushed the oil price down toward $107 a barrel. OPEC also lowered its 2014 forecast of oil demand.

The fall in Chinese exports last month marked the first time they have declined for two months in a row since 2009.

Gold rose and touched a 2-1/2-week high as the dollar dropped. Spot gold hit its highest level since March 24 at $1,324.40 an ounce earlier, before easing to $1320.30, a gain for the day of 0.56 percent.

(Reporting by Michael Connor in New York; Additional reporting by Sudip Kar-Gupta in London and Gertrude Chavez-Dreyfuss, Ryan Vlastelica, Chuck Mikolajczak and Richard Leong in New York; Editing by Leslie Adler)

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