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 S&P 500 sectors were lower, with energy, financial and technology stocks among the worst performers. The benchmark S&P 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 S&P 500 up more than 27 percent from its October low.
For a graphic on the effect of the U.S. Federal Reserve and the European Central Bank's stimulus programs on global stocks, see http://r.reuters.com/rec57s
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
Semiconductors weighed on the Nasdaq, as SanDisk Corp
The PHLX semiconductor index <.SOX> lost 2.7 percent.
(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)