Stocks sank on Wednesday as Greek debt woes, U.S. data and disappointing profit forecasts fueled bearish sentiment, putting the market back on its downtrend after a two-day rally.
Forecasts from companies, including Nucor Corp
Bank stocks helped lead the decline after Moody's Investors Service said it may cut the credit ratings of French banks, citing exposure to Greek debt. The French banks have $65 billion in overall net exposure, versus $40 billion for Germany and $41 billion for the United States, according to the Bank for International Settlements.
Declines in shares of insurers also outpaced the broader market, with the KBW insurance index <.KIX> down 2.8 percent. Allstate
The KBW bank index <.BKX> was down 2 percent. Manufacturer 3M
The downward trend that's been in place for the last couple of months certainly remains intact, and I suspect it will remain intact until we get more concrete data with regard to the second quarter, said Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas.
The CBOE Volatility Index <.VIX> jumped 14 percent to 20.82 -- its highest level since March 23.
The core U.S. Consumer Price Index, which excludes volatile food and energy prices, rose more than expected in May, while the New York Federal Reserve's Empire State manufacturing index unexpectedly shrank in June, falling below zero for the first time since November.
The data confirmed views that the economy is getting weaker even as prices are rising. Those economic worries largely have been behind a roughly 8 percent slide in the S&P 500 since its near three-year high on May 2nd.
Worries about the Greek debt crisis escalated as Moody's Investors Service said it may cut the credit ratings of French banks, citing exposure to Greek debt.
The Dow Jones industrial average <.DJI> was down 183.65 points, or 1.52 percent, at 11,892.46. The Standard & Poor's 500 Index <.SPX> was down 22.94 points, or 1.78 percent, at 1,264.93. The Nasdaq Composite Index <.IXIC> was down 43.05 points, or 1.60 percent, at 2,635.67.
Moody's also said it may downgrade the ratings of some subsidiaries of Portuguese banks in Brazil.
In the insurance industry, Allstate suffered a setback in its lawsuit against Bank of America Corp's Countrywide unit over toxic mortgage debt, with a Manhattan federal judge moving the dispute to Los Angeles.
Insurers have come under pressure as devastating tornadoes in the U.S. and the earthquake in Japan are expected to weaken second-quarter results.
Steelmaker Nucor issued a forecast that missed Wall Street's expectations, and its shares fell 1.5 percent to $40.11. Shares of Owens Illinois, the world's largest maker of glass bottles, tumbled 10.9 percent to $26.32 after the company cut its second-quarter outlook. The stock of No. 2 U.S. automaker Ford
The Nasdaq 100 <.NDX> broke below its 200-day moving average, and many traders expect the S&P 500 to test its March low near the 1,250 level.
The S&P 500 rose on Monday and Tuesday after posting its sixth week of declines Friday.
(Reporting by Caroline Valetkevitch; Editing by Jan Paschal)