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 Financials and materials stocks were the day's biggest losers while
telecom services was the only positive sector as investors sold
growth-oriented stocks and bought defensive ones. Trading volume was
heavier than in recent sessions.
The market sentiment was dented by a report on manufacturing in
China which showed a mild slowdown at the end of 2013 in the world's
second-largest economy had continued into the new year..
U.S.-traded Chinese stocks were down sharply after a U.S. Securities
and Exchange Commission judge ruled that the Chinese units of the
world's top accounting firms should be suspended from auditing those
companies.
Among the biggest losers were Internet services provider Baidu Inc <BIDU.O>,
down 6.2 percent, and SINA Corp <SINA.O>, down 5.9 percent, on
heavier-than-usual volume. The U.S. shares of Petrochina <601857.SS>
<PTR.N>, the country's largest stock by market value, fell 3.1
percent.
The CBOE Volatility index VIX <.VIX> often used as a fear gauge on
Wall Street, closed up 7.2 percent at 13.77 after rising more than
11 percent earlier.
"The day's panic was largely associated with China and I think it's
a temporary reaction," said Randy Frederick, managing director of
active trading and derivatives at Charles Schwab in Austin, Texas.
"If we have good corporate earnings from a couple of big names or
good economic reports, I think we will be right back up to where we
were a couple days ago."
The Dow Jones industrial average <.DJI> fell 175.99 points or 1.07
percent, to 16,197.35, the S&P 500 <.SPX> lost 16.4 points or 0.89
percent, to 1,828.46 and the Nasdaq Composite <.IXIC> dropped 24.126
points or 0.57 percent, to 4,218.875.
Trading volume was higher than usual with 7.4 billion shares traded
on all U.S. platforms compared to a five-day average of 6.7 billion
shares, according to BATS exchange data. Both on the NYSE and Nasdaq,
decliners beat advancers by a ratio of about 2 to 1.
After the bell, Microsoft Corp <MSFT.O> said fiscal second-quarter
profit rose 3 percent, as strong sales of its Office software to
businesses offset another weak quarter for its flagship Windows
system, and as consumers increasingly favor tablets over personal
computers. The stock rose 3.7 percent in extended trade.
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Starbucks Corp's <SBUX.O> sales at established stores in its
U.S.-dominated Americas region cooled more than analysts expected in
its latest quarter as consumers spent more time holiday shopping
online than at physical stores. The stock rose 1 percent in extended
trade.
Apple Inc <AAPL.O> rose 0.8 percent to $556.18. Activist investor
Carl Icahn picked up another $500 million of Apple shares, taking
the billionaire's total investment in the iPhone maker to $3.6
billion.
In other earnings, McDonald's Corp <MCD.N> reported
weaker-than-expected revenue as fewer customers ate at its
restaurants. Shares rebounded from earlier losses to close up 0.5
percent to $95.32.
Netflix Inc <NFLX.O> shares surged 16.5 percent to $388.72 as the
best performer on the S&P 500. The world's largest video-streaming
company said Wednesday it added more than 2.3 million U.S. customers
in the fourth quarter.
Shares of Herbalife <HLF.N> fell 10.3 percent to $65.92 in heavy
volume after Massachusetts Senator Edward Markey asked for more
information about its business practices. The nutrition company has
been accused by prominent hedge fund manager William Ackman of
running a pyramid scheme.
Thomson Reuters data through Thursday morning shows earnings for the
fourth quarter are expected to grow 7 percent. Of the 102 companies
in the benchmark that have reported, 63 percent beat expectations,
in line with the long-term average.
(Editing by Nick Zieminski)
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