The S&P 500 Index closed at 1,084.48, down 13.02 points or 1.19 percent for the day. It recovered from a morning low of 1079. The Dow Jones U.S. Technology Index closed down 2.95 percent. The basic materials sector was also hit hard, as the Dow Jones U.S. Basic Materials Index lost 2.03 percent.
Fed Chairman Ben Bernanke passed the cloture vote scheduled at 3:20 pm today as 77 Senators voted for the Fed Chairman. The Senate then quickly reconfirmed Bernanke, 70 to 30, in a second round of voting to officially grant him his second term.
The heaviest selling occurred in the morning session as weak economic data was reported and doubts of Bernanke confirmation still persisted.
Worse than expected unemployment claims of 470,000 were reported for the week ending in January 23. It was down from the 478,000 reported a week ago but missed expectations as experts forecasted 450,000 claims, according to Bloomberg.
Although durable-goods orders for December were higher than expected, orders for computers and electronic products fell 3.0 percent and orders for electrical equipment, appliances, and components fell 3.9 percent.
Risk aversion subsided towards the closing of European markets. The VIX, or the Chicago Board Options Exchange Volatility Index, which measures implied volatility for S&P 500 index options, peaked around 11:45 am at 25 percent before dropping to 23.7 percent in afternoon trading.
Traders use VIX as a measure of risk-aversion as higher volatilities for the S&P 500 implies higher expected risk.
Similarly, the yen, another barometer for risk-aversion, peaked against the dollar around 11:30 am before dropping 27.1 pips in the afternoon to trade at USD/JPY 89.892.
Tech stocks led the decline for the stock market today as Apple (Nasdaq:AAPL) lost steam and was down 4.13 percent. Qualcomm (Nasdaq:QCOM) continued to drop as it issued a disappointing earnings forecast and reported weak revenues yesterday after the market closed. It ended 14.24 percent lower today. Motorola (NYSE:MOT) reported disappointing revenues in the morning and closed down 12.30 percent.
US banks rallied in the afternoon session, with Bank of America (NYSE:BAC) gaining 1.51 percent and Goldman Sachs (NYSE:GS) gaining 1.23 percent.
European banks, after leading the rally in the London Stock Exchange early in the European morning session, erased their gains. Barclays (NYSE:BCS) was down 2.14 percent, RBS (NYSE:RBS) ended 3.30 percent lower, and Deutsche Bank (NYSE:DB) fell 1.58 percent.
Stand & Poor's issued a statement this morning that it no longer classifies the UK's banking system as among the most stable in the world. It moved the UK down from Group 2 to Group 3 on high leverage in the economy and weak earnings prospects.