After turning in a strong performance in the previous session, stocks showed a substantial move back to the downside during trading on Wednesday. Renewed concerns about the financial situation in Europe contributed to the sharp pullback by the markets.
The major averages posted steep losses on the day, offsetting Tuesday's gains. The Dow fell 160.83 points or 1.3 percent to 12,419.86, the Nasdaq dropped 33.63 points or 1.2 percent to 2,837.36 and the S&P 500 slid 19.10 points or 1.4 percent to 1,313.32.
The sell-off on Wall Street came as traders expressed concerns about the impact of rising Italian and Spanish bond yields and the possibility that the European debt crisis will continue to spread.
Additionally, a new poll out of Greece showing the anti-bailout Syriza party in the lead in next month's elections also led to renewed concerns about the outlook for the debt-plagued nation.
Disappointing U.S. economic data also contributed to the negative sentiment, as a report from the National Association of Realtors showed that pending home sales unexpectedly saw a notable decrease in the month of April.
NAR said its pending home sales index tumbled 5.5 percent to 95.5 in April after rising 3.8 percent to a downwardly revised 101.1 in March. The drop by the index surprised economists, who had expected pending home sales to edge up by 0.5 percent.
A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
Among individual stocks, Pep Boys (PBY) posted a substantial loss after the auto parts retailer announced the termination of its proposed merger with Gores Group. Shares of Pep Boys plummeted 19.8 percent.
BlackBerry maker Research in Motion also came under pressure after saying it now expects to report an operating loss for its first quarter. The company attributed the disappointing forecast to the competitive environment.
Meanwhile, shares of Sallie Mae (SLM) bucked the downtrend after the student lender said its board authorized the repurchase of an additional $400 million worth of stock.
While significant weakness was visible in most major sectors, housing stocks posted particularly steep losses following the disappointing pending home sales data. The Philadelphia Housing Sector Index plunged 4.1 percent after closing higher in five out of the six previous sessions.
Oil service stocks also showed a substantial move to the downside amid a sharp drop by the price of crude oil. With crude for July delivery tumbling $2.94 to $87.82 a barrel, the Philadelphia Oil Service Index dove 3.9 percent.
After helping to lead the markets higher on Tuesday, steel stocks also saw considerable weakness on the day, resulting in a 3.2 percent loss by the NYSE Arca Steel Index.
Natural gas, electronic storage, banking, and railroad stocks also posted standout losses, reflecting the broad based weakness in the markets.
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index ended the day down by 0.3 percent, while Hong Kong's Hang Seng Index plummeted by 1.9 percent.
The major European markets also showed notable moves to the downside on the day. While the French CAC 40 Index tumbled 2.2 percent, the U.K.'s FTSE 100 Index and the German DAX Index slumped 1.7 percent and 1.8 percent, respectively.
In the bond market, treasuries moved sharply higher amid the renewed worries about Europe. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, plunged 10.6 basis points to a record closing low of 1.625 percent.
U.S. employment data may temporarily distract traders from Europe on Thursday, as Automatic Data Processing (ADP) is due to release its monthly private sector jobs report and the Labor Department is scheduled to release its weekly jobless claims report.
A revised report on first quarter GDP and data on Chicago-area business activity may also attract some attention, although traders are likely to be cautious ahead of the release of the Labor Department's monthly jobs report on Friday.
by RTT Staff Writer
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