Stocks fell on Wednesday as Germany's decision to ban naked short-selling of certain financial instruments fueled investor worries about exposure to riskier assets and about the global economy.
Shares of industrial companies, which tend to rely heavily on overseas sales, led losses. Caterpillar was down 4.6 percent at $60.24, while shares of Boeing was down 3.2 percent at $65.57. Microsoft , down 1.2 percent at $28.27, was among the top drags on the Nasdaq.
I think it's all global response to the German move to limit naked short selling. It signaled to investors another step was needed to protect the euro, said Fred Dickson, chief market strategist at D.A. Davidson & Co., speaking from New York. It reflects there are continuing tensions.
The S&P 500 briefly pierced 1,102.12, its 200-day moving average, seen as a support level. A close below the level could trigger more selling, analysts said. European stocks also tumbled on Germany's move, and hit their lowest closing level in nearly two weeks, while Japan stocks also fell.
Germany banned naked short sales of euro-denominated government bonds, credit default swaps based on those bonds and shares of the country's 10 leading financial institutions in a move that appeared to catch its partners in the European Union off guard.
The Dow Jones industrial average <.DJI> was down 122.81 points, or 1.17 percent, at 10,388.14. The Standard & Poor's 500 Index <.SPX> was down 13.01 points, or 1.16 percent, at 1,107.79. The Nasdaq Composite Index <.IXIC> was down 34.95 points, or 1.51 percent, at 2,282.23, after earlier sliding 2 percent to a session low.
The U.S. stock market's decline has left only the Nasdaq in positive territory for the year.
In naked short selling, a trader sells a financial instrument, betting that its price will fall, without first borrowing the instrument or ensuring that it can be borrowed, as in a conventional short sale.
German Chancellor Angela Merkel said in a speech to parliament the euro was in danger, urging speedy action to stop market extortion, and said the EU needed a process for orderly insolvency of its members.
Later Wednesday, the Federal Reserve's policy-making committee will release minutes from its most recent meeting.
On the upside were shares of Hewlett-Packard Co . H-P's stock added 1 percent to $47.26 after the world's largest technology company by sales reported quarterly results that beat expectations and raised its full-year earnings outlook.
(Reporting by Caroline Valetkevitch; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)