U.S. stocks dropped for the first time this week on Thursday, after Federal Reserve Chairman Ben Bernanke forecasted sluggish economic growth in 2008.
In a testimony before a congressional committee, Fed Chairman Ben Bernanke acknowledged the outlook for the economy had worsened in recent months and said risks to growth had picked up.
Bernanke's comments added to ongoing concern that credit-market losses will spread beyond the financial industry after the world's largest banks and securities firms wrote down $146 billion since the beginning of 2007.
Intel, the world's largest chipmaker, dropped for the first time in six days and set the pace for blue-chip decliners. Its shares fell 3.2 percent spurred off by Goldman Sachs decision to take the company off its Conviction Buy list.
Graphics chip maker NVIDIA Corp added further concerns to the technology sector after it reported weaker margins for the first time in more than 3 years.
Intel shares fell 3.5 percent to $20.46, while Nvidia tumbled 16.3 percent to $22.61.
Financial stocks weighed the Dow as well, with J.P. Morgan Chase off 3.4 percent, while share of Citigroup Inc. slipped 2.3 percent and American Express Co. lost 2.5 percent. Bernanke said he saw no imminent threat of bank insolvencies but said more write-downs are likely.
The Dow Jones Industrial Average fell 175.3 points, or 1.4 percent, to end at 12,377, with all but one of its 30 components ending in the red. The Nasdaq Composite Index fell 41.39, or 1.7 percent, to 2,332.54. About five stocks declined for every one that rose on the New York Stock Exchange.
The Standard &Poor's 500 decreased 18.35 points, or 1.3 percent, to 1,348.86. All 10 industry groups in the S&P 500 Index declined, putting an end to the market's longest rally of the year.