Two economic reports had only modest impact on Treasuries. The U.S. trade deficit for January hit a new high, coming in at $68.5 billion -- higher than forecasts for $66.8 billion and far higher than the $65.1 billion recorded in December. Sharp increases in oil and energy prices were largely responsible for the widening trade gap, but substantial increases in imported wines also added to the total and increased the cost of foods. The huge trade deficit will dent first-quarter gross domestic product.

For the first time since Jan. 7, unemployment claims exceeded 300,000. First-time claims for the week ended March 4 rose to 303,000 from 295,000. Analysts were expecting a decline to 290,000. The more closely watched four-week average, which smoothes volatility, climbed to 293,000, while continued claims -- benefits paid to people out of work for more than one week -- rose to 2.51 million. This report showed a slight easing in the job market, which was a positive for bond traders who are concerned a tight labor market could lead to wage inflation.

Stocks fail to hold gains

Stocks opened to the upside, bolstered by news that the Bank of Japan will not raise interest rates immediately and laid to rest concerns Japan's near-zero rates would come to a halt. But worries about high interest rates, the huge trade deficit and the upcoming employment report turned optimism to pessimism. The three major indexes closed in negative territory, with the Nasdaq sustaining the steepest loss and the Dow Jones industrials dipping below 11,000.

Losses on the Dow would have been worse, but GM added 4.4 percent on news that there is an agreement in the works with parts supplier Delphi and the UAW that would avoid a strike and cut labor costs. Boeing was the only other component to gain more than 1 percent. Of the 20 that closed in negative territory, Exxon, Intel, JP Morgan and Home Depot each lost 1.3 percent. Caterpillar, an interest-sensitive stock, led with a 1.4 percent decline, and American Express was off by 1.2 percent.

There were some big gainers in the Nasdaq, but semiconductors and software had a tough day, as did search engines. Google's problems won't go away. It lost close to 11 percent on the session while Baidu, the Chinese search engine, was off by more than 4 percent. There were a few winners, such as Sun Microsystems, which gained close to 4 percent due to an upgrade. Biogen rose 5 percent on word that it can reintroduce its multiple-sclerosis drug Tysabri -- with restrictions.

As of 4 p.m. EST:

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