By Alan Fein

(AXcess News) New York - Investors worried over the Obama administration's reckless spending and record deficit watched as the benchmark 10-year treasury note fell, dragging stocks with it.

The 10-year treasury note fell, driving the yield on the bellwether U.S. government bond up to 3.6950%, a gain of 0.2020.

The Dow rally came to an end with Dow Jones Industrial Average losing 157 points, or nearly 1.9%, to trade at 8,316.  The broader S&P 500 index fell more than 15 points, or .167%, to trade at 895.  While the tech-heavy Nasdaq National Market Index lost just shy of 16 points, or 0.91%, at 1,734 minutes before the closing bell in New York rang.

The government is in the throws of selling $110 billion in Treasury notes this week and the big drop Wednesday came after the sale of $35 billion in five-year notes.

Bond traders showed strong interest in the five-year note auction though investors are concerned that demand for government bonds could weaken, which pushed the yield on Treasuries higher.

Concerns over the growing amount of treasury debt slowing an economic recovery were also at the forefront of investors minds.  Earlier this morning it was revealed that Treasury Secretary Tim Geithner had pounded out a new deal with the United Auto Workers Union in which the government would end up owning 70% of General Motors  (NYSE: GM) in guaranteeing the repayment of $6 billion in secured debt to Citigroup and JP Morgan, which paved the way for a smooth bankruptcy filing after GM withdrew its offer to convert $27 billion in debt into a 10% equity stake in the automaker when bondholders rejected the offer.  The UAW, which would have had 39% of GM stock under the previous deal, now get 17%.  But Geithner would have to pony up another $50 billion as well which would mean extending federal spending limits under the previously approved stimulus plan.

Rising yields on treasury notes will affect the cost of borrowing, say investors.  Considering the slump in housing prices and the recent credit card bill of rights that Obama signed into law, consumers could face much higher costs for borrowing money in this tight economy.  If consumer access to credit tightens or costs go up, it will affect spending levels in a nation that relies heavily on consumer spending within its economy.

On the bright side of consumer sentiment, the Conference Board's monthly survey of consumer sentiment rose to an unprecedented eight-month high in May, far more than economists were expecting.  But at the same time, costs for energy have been climbing with gasoline up 8 cents per gallon nationally over the last week.  Wednesday crude prices rallied to a six-month high reaching the $64 per barrel mark.   Saudi Arabia's Oil Minister Ali al-Naimi told reporters in Vienna on the eve of the OPEC meeting that the market was ready, and able to handle, crude oil prices in the $75 to $80 per barrel range, despite having said from Cairo on Monday that he doubted production levels would be cut.