Tech, poor auction hits Wall St.; banks up late

By Ellis Mnyandu

NEW YORK (Reuters) - Wall Street stocks slid on Thursday as investors took profits from the technology sector's recent surge, while analyst downgrades hurt telecoms and a tepid response to a government bond auction raised fears about public finances.

Bank stocks also succumbed to profit-taking, with the KBW Bank index .BKX dropping 3.5 percent, a day after leaked results from so-called stress tests suggested that most U.S. banks were healthier than previously thought.

But stock index futures rose after the official government results were released at 5 p.m. EDT (2100 GMT) as regulators told leading banks to raise $74.6 billion to build a capital cushion officials hope will restore faith in financial firms and set a course out of the deepest recession in decades.

Shares of several major banks, including Citigroup (C.N) also rose after the bell, with Citi gaining 6.6 percent to $4.06 after regulators said the bank's capital need was $5.5 billion. Citi had ended the regular session down 1.3 percent.

"The results should end the concerns about failure or nationalization," said Eric Kuby, chief investment officer at NorthStar Investment Management Corp in Chicago. The Select Sector SPDR Financial ETF (XLF.P) rose 1.2 percent after the bell.

In the regular session investors worried that poor demand for government debt could raise the cost of capital and hamper chances of a U.S. economic recovery.

U.S. debt prices slid, sending the 30-year Treasury bond yield to its highest since November.

"The auction is big news because now it's showing that maybe the Chinese don't want our bonds. If the cost of capital for the United States becomes more expensive, then the recession is going to take that much longer to get out of," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.