Stocks fell on Wednesday as weak earnings from Oracle raised concerns about the health of the tech sector and on concerns that cut-rate loans from the European Central Bank will not filter down to help Europe's debt-stricken countries.
With all the fear about Europe, and the fact that Oracle had beaten for the previous four quarters, that they missed on both earnings and revenue here makes you take a step back, said Daniel Morgan, portfolio manager at Synovus Securities in Atlanta, Georgia.
It raises an eyebrow that things may not be as hunky dory as we've been led to believe in terms of IT spending.
Banks took nearly 490 billion euros in three-year cut-price loans from the European Central Bank on Wednesday. Markets had run up ahead of the tender but a widening of the yield spread between German and Italian debt suggested that money was not flowing where it is most needed.
The Dow Jones industrial average <.DJI> dropped 76.06 points, or 0.63 percent, to 12,027.52. The Standard & Poor's 500 Index <.SPX> fell 8.51 points, or 0.69 percent, to 1,232.79. The Nasdaq Composite Index <.IXIC> lost 52.03 points, or 2.00 percent, to 2,551.70.
An Italian banking group said banks would not increase their exposure to sovereign debt even after the ECB offering because European Bank Authority rules discourage it.
Ryan Larson, head of equity trading at RBC Global Asset Management in Chicago, said unconfirmed talk was circulating in the market that banks would use ECB loans to buy German bonds and not to support the debt of Spain and Italy.
That kind of spooked the market, he said. While it is a positive development in terms of the lending facility there are still a lot of problems out there.
He said he was not able to confirm any of the market speculation.
Tuesday's rally lifted the S&P 500 above its 50-day moving average. Many investors and traders are looking for a seasonal rally into the end of the year and are keen to jump on any signs of momentum.
A lot of money managers have underperformed the market and it puts on a little pressure to be invested, said Eric Kuby, chief investment officer for North Star Investment Management Corp. in Chicago. If you don't think there's a big sell-off coming, you're probably looking to buy stocks on any dip.
As the Christmas and New Year holidays approach, equities will likely to become more volatile as volume peters out.
U.S.-listed shares of Research in Motion Ltd
The latest economic data showed sales of previously owned U.S. homes surged in November, but revisions to data for the last four years showed the housing market recession was deeper than previously thought.
Shares of Walgreen Co
Contract electronics manufacturer Jabil Circuit Inc
(Additional reporting by Ryan Vlastelica; Editing by Leslie Adler)