Drop in Apple shares, weak profits drag Wall Street lower
Besides financials and technology, energy and materials sectors fell sharply along with oil and copper prices.
New York: US stocks fell in a broad market selloff on Wednesday, led by a sharp drop in Apple shares on worries about slowing demand for its products and weaker-than-expected results from Bank of America that battered the financial sector.
Apple Inc slid 5.5 per cent to $402.80 after falling below $400 for the first time since December 2011. A key supplier, chipmaker Cirrus Logic , gave a disappointing revenue forecast, fueling worries about weakening demand for the iPhone and iPad.
The CBOE Volatility index, a measure of investor anxiety, jumped 18.3 per cent to 16.51. It remains well below the 20 mark, however, suggesting market volatility is still considered relatively subdued.
Wednesday's losses were the week's second big sell-off, adding to views the market may be starting the pullback analysts have been speculating about for months. The market has had strong gains since the start of year, yet on Monday, the S&P 500 posted its worst day since November 7, 2012 following a sharp drop in gold prices.
"After Monday's gold selloff spooked US equities, it seems as though the dip buyers are a bit less aggressive, allowing the market to fall a bit more," said Gordon Charlop, a managing director at Rosenblatt Securities in New York.
"This could also be indicative of a muted risk tolerance and perhaps mark the beginning of a long-awaited equity pullback."
The Dow Jones industrial average was down 138.19 points, or 0.94 per cent, at 14,618.59. The Standard & Poor's 500 Index was down 22.56 points, or 1.43 per cent, at 1,552.01. The Nasdaq Composite Index was down 59.96 points, or 1.84 per cent, at 3,204.67.
Volume was roughly 7.89 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, well above the average daily closing volume of about 6.36 billion in 2013. Decliners outpaced advancers by nearly 4 to 1 on both the NYSE and the Nasdaq.
Financial stocks also fell after Bank of America Corp posted revenue and profits that were below Wall Street expectations. Shares of the Dow component slumped 4.7 per cent to $11.70.
The S&P financial index was down 1.9 per cent and shares of Morgan Stanley, due to report on Thursday, were down 1.7 per cent.
Besides financials and technology, energy and materials sectors fell sharply along with oil and copper prices. The S&P 500 energy companies fell 1.9 per cent and shares of Chevron slid 1.9 per cent to $114.81 and helped lead declines on the Dow.
As Apple shares moved lower, the stock's implied volatility shot higher, reflecting more risk for the stock in the next 30 days.
"This continues a trend since December 2012 where the risk paradigm in Apple has changed," said Ophir Gottlieb, managing director of San-Francisco-based options analytics Livevol.
In a notable technical move, the S&P 500 came close to falling below its 50-day moving average. It has not fallen below the level since the end of 2012.
Among other tech decliners, Texas Instruments shed 4.3 per cent to $34.21. Yahoo Inc declined 0.4 per cent to $23.70 after the Internet company reported first-quarter revenue that missed expectations, though many Wall Street analysts raised their price targets on the stock.
S&P 500 earnings are now expected to have risen 1.7 per cent in the first quarter, based on actual results from 56 companies and estimates for the rest, according to Thomson Reuters data.
That expectation is up from a previous estimate of 1.5 per cent growth at the start of the month, but so far just 48.2 per cent of companies this reporting period have beaten revenue expectations.
After the closing bell, shares of eBay and memory chipmaker SanDisk fell after reporting results. EBay was down 2.3 per cent at $54.80 while shares of SanDisk were down 3.1 per cent at $54.
Adding to uncertainty in the market, authorities said a letter sent to President Barack Obama and intercepted at a mail screening facility contained the deadly poison ricin, according to preliminary testing.
"The ongoing sequence of these terrorist incidents ... doesn't create an environment for good investor psychology," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.