Damaging disclosures were revealed early in the session that QWest was under criminal investigation by the Justice Department and that Vice President Cheney was facing a shareholder law suit led by Judicial Watch for his dealings in Halliburton stock.
The Dow cracked below 9000, 8900 and nearly 8800 for a 3% loss, dragging the rest of the market with it. The Treasury's $9 billion TIPS auction went well under the circumstance and this fuelled another wave of demand. The September bond closed nearly a point higher at 104-26, having touched the 105-handle on the session, while the two-year note and 30-year bond yield gap vaulted above the +275 basis point "psychological" area to post a three basis point gain on the day.
Oil prices surged on back-to-back bullish inventory data, with NYMEX August topping $27/barrel at one point, though this seemed to be more disturbing to stocks that rampant bonds.