Wall Street drops on fading Fed stimulus hopes, euro zone

April 4th, 20126:11 pm @

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NEW YORK |
Wed Apr 4, 2012 1:41pm EDT

NEW YORK (Reuters) – Stocks dropped for the second straight session on Wednesday, a day after minutes from the latest Federal Reserve meeting suggested further monetary stimulus was unlikely and a disappointing Spanish debt auction rekindled euro-zone concerns.

Spanish borrowing costs jumped at bond auctions, sparking worry about a recurrence of a euro-zone debt crisis and highlighting recession worries in the region.

The PHLX Europe sector index .XEX lost 3 percent.

Selling was broad as indexes tracking nine of the 10 SP 500 sectors were lower, with energy, financial and technology stocks among the worst performers. The benchmark SP 500 index has fallen in eight of the past 12 sessions. The Nasdaq was on track for its worst percentage drop since December 8.

Two Long-Term Refinancing Operations launched by the European Central Bank had helped push euro-zone fears to the background and enabled investors to focus on improving domestic data and a supportive monetary policy from the Fed, sending the SP 500 up more than 27 percent from its October low.

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For a graphic on the effect of the U.S. Federal Reserve and the European Central Bank’s stimulus programs on global stocks, see r.reuters.com/rec57s

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“They are still recovering from the surprise they got from the Fed yesterday and the minutes,” said Cummins Catherwood, managing director of Boenning Scattergood in West Conshohocken, Pennsylvania.

“The market has been looking for a reason to consolidate, take a rest, call it what you what will, and a large part of that is what is happening today.”

The Dow Jones industrial average .DJI dropped 163.51 points, or 1.24 percent, to 13,036.04. The Standard Poor’s 500 Index .SPX fell 18.39 points, or 1.30 percent, to 1,394.99. The Nasdaq Composite Index .IXIC declined 58.92 points, or 1.89 percent, to 3,054.65.

Private-sector jobs data, released by payrolls processor ADP, showed U.S. employers added 209,000 jobs in March, suggesting the labor market was continuing to strengthen, but it was not enough to boost investor sentiment.

The Institute for Supply Management’s services-sector index for March fell to 56.0 percent from 57.3 percent in February, the private group reported. Market reaction was muted.

In corporate news, Moody’s downgraded the ratings of conglomerate General Electric Co (GE.N) and its finance unit General Electric Capital each by a notch, saying there were “material risks” associated with GE Capital’s funding model. The stock, a Dow component, fell 1.2 percent to $19.73.

Yahoo Inc (YHOO.O) said it was laying off 2,000 employees, signaling a broad shakeup of the company. The stock dropped 0.9 percent to $15.05.

McDonald’s Corp (MCD.N) lost 2.3 percent to $97.16 after Goldman Sachs removed the stock, a Dow component, from its “conviction buy” list, and cut its price target on the shares of the world’s largest fast-food restaurant chain to $110.

Semiconductors weighed on the Nasdaq, as SanDisk Corp (SNDK.O) dropped 10.2 percent to $44.93 after the flash-memory maker warned that its revenue and margins are hurting from weak demand from mobile phone manufacturers as well as from a glut in supply that has led to lower prices.

The PHLX semiconductor index .SOX lost 2.7 percent.

(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/yWqksXVamqY/us-markets-stocks-idUSBRE83105P20120404