Wall Street slides as Oracle drops
US stocks fell on Thursday as Oracle's revenue fell far short of expectations and worries intensified about the effect of Cyprus' troubles on the eurozone. Oracle Corp shares lost 9.7 percent to $32.30 and were the biggest drag on Nasdaq, a day after its revenue disappointment, which it blamed on sales execution. It was the stock's biggest percentage drop since December 2011.
Copyright Reuters, 2013
Stock losses accelerated late in the session as anxiety about Cypriot finances increased. Just before the US market's close, Standard & Poor's cut Cyprus' sovereign credit rating deeper into junk status. The European Union gave Cyprus until Monday to raise the billions of euros it needs to get an international bailout - or face the collapse of its financial system and likely exit from the euro bloc.
"I think the realisation is, there isn't going to be a quick remedy to the situation, nor is it easy to forecast what's going to happen. Uncertainty breeds selling, especially in a market that's gone as far as we have in the previous two weeks," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. The latest euro-zone concerns hit the market after weeks of gains that drove the Dow up to break record highs and lifted the S&P 500 to within striking distance of its all-time record close of 1,565.15.
Investors fear a collapse of the banking system in Cyprus will tighten credit across Europe and become yet another hurdle on the region's bumpy road out of economic crisis. Adding to those fears, data showed the region's economy contracted more than expected in March. The Dow Jones industrial average slid 90.24 points, or 0.62 percent, to end at 14,421.49. The Standard & Poor's 500 Index dropped 12.91 points, or 0.83 percent, to finish at 1,545.80. The Nasdaq Composite Index lost 31.59 points, or 0.97 percent, to close at 3,222.60.
At its session low of 14,383.02, the Dow was down more than 120 points. The Nasdaq fell 1.2 percent to an intraday low of 3,215.69 during Thursday's slide. The CBOE Volatility Index or VIX, Wall Street's favourite barometer of fear, shot up 10.4 percent to 13.99. After the bell, shares of Nike rose 8.3 percent to $58.05 after it posted a profit that beat analyst expectations. In the regular session, the stock closed at $53.60.
During regular trading, Cisco was the Dow's biggest percentage loser. Cisco fell 3.8 percent to $20.84 after brokerage FBR downgraded its rating on the network equipment maker's stock and cut its price target. Among other tech shares, International Business Machines lost 1.3 percent to $212.26. The S&P basic materials sector index fell 1.6 percent, making it the heaviest weight on the S&P 500. Copper prices also slid. The benchmark S&P 500 index is on track to post only its second weekly percentage drop so far this year, a testament to its impressive 2013 run.
Among the day's other falling shares, apparel retailers Guess, Tilly's and Pacific Sunwear of California slid after they forecast first-quarter results significantly below analysts' estimates. Guess fell 7.2 percent to $25.01, Tilly's shed 8.4 percent to $12.60, and Pacific Sunwear lost 9.8 percent to $2.20. The euro-zone concerns overshadowed a batch of reports suggesting the US economic recovery was on the right track and solid first-quarter growth in China.
A downward trend in jobless claims, an increase in factory activity and a rise in sales of existing homes pointed to growing momentum in the US economy during the first quarter of the year. Initial claims for US unemployment benefits inched higher in the latest week, but the four-week average of new claims - a measure of labour market trends - fell to its lowest level in five years.
Volume was roughly 5.9 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the 2012 average daily closing volume of about 6.45 billion. Decliners outpaced advancers on both the NYSE and the Nasdaq by a ratio of nearly 2 to 1.