Weak German Bond Sale Mashes Markets

A German offering of 10-year debt failed to draw the robust support the country has been accustomed to as a safer haven than its European neighbors, and stocks tumbled Wednesday in response as spooked investors fled from any semblance of risk ahead of Thursday’s day off for Thanksgiving, Friday’s shortened session and the weekend.

Germany was barely able to sell more than half of a planned �6 billion auction of 10-year bunds, at a yield of 1.98%. While rates remain low, the failed auction is a worrying sign that Europe’s debt crisis is impacting demand for even the safer credits of so-called core countries at a time when yields in threatened peripheral countries Italy and Spain are trading at or near the 7% level.

The rocky German bund sale had stocks reeling from the opening bell in New York. With just over an hour to the close of trading the Dow Jones industrial average was down 196 points to 11,298, the S&P 500 fell 22 points to 1,166 and the Nasdaq lost 52 points to 2,469.

Bank stocks were trading lower, including Dow components Bank of America, down 4.1%, and JPMorgan Chase, down 3%. On Tuesday, the Federal Reserve revealed details of the scenarios it will require major U.S. financial firms to stress test their portfolios for, including a situation similar to the 2008 crisis with a dose of European meltdown for the six largest firms. (See “Fed’s 2012 Stress Scenario: 2008 Plus European Blowup.”)

Groupon was in the headlines after the daily deal site’s shares fell more than 15% to trade below the $20 level it priced an initial public offering of a sliver of its stock early in November. (See “Groupon’s Nosedive An Ominous Sign For Internet IPOs.”)

In U.S. economic news, the final November reading on consumer sentiment from the University of Michigan survey came in at 64.1, shy of estimates and the previous forecast earlier in the month. Initial jobless claims climbed in the late! st weekl y gauge, but remained below 400,000 at 393,000.

Deere & Co. was one of the few bright spots Wednesday ahead of the Thanksgiving holiday when U.S. markets close. The agriculture equipment maker reported a 46% gain in fourth-quarter profit and said it expects sales to rise 15% in 2012, even though business is likely to be flat in Europe. Shares of Deere were off their morning highs but still in positive territory, up 2.6%. (See “Deere Says Forget Europe, Growth Will Come From Elsewhere.”)