Stocks hit a four-month low on Thursday as rising Spanish bond yields increased investor anxiety over that country's banks and another round of weak data undermined hopes for US economic recovery.
Growing worries over developments in the euro zone and lackluster economic data pushed the S&P's losing streak to five consecutive days. The index, which closed at a level not seen since mid-January, has now relinquished more than half of its gains from the first quarter.
"There is not a lot of interest in the equity market," said Jason Weisberg, managing director at Seaport Securities Corp in New York. "The overhang with Europe is so heavy, people are tired of playing whack-a-mole, and their portfolios are the mole."
The Dow Jones Industrial Average dropped 156.06 points, or 1.24%, to 12,442.49. The Standard & Poor's 500 Index fell 19.94 points, or 1.51%, to 1,304.86. The Nasdaq Composite Index lost 60.35 points, or 2.10%, to 2,813.69.
Caterpillar Inc dropped 4.5% to USD 87.77 as the biggest drag on the Dow after the heavy equipment company's dealers reported slowing sales for April. The Dow declined for an eleventh session in the past 12.
A gauge of future US economic activity fell in April for the first time in seven months, and the Philadelphia Federal Reserve's index of business conditions hit its lowest since September.
In addition, the weekly claims for jobless benefits showed no improvement, a sign the pace of hiring remains lackluster.
Spain's El Mundo newspaper reported that customers at troubled Spanish lender Bankia had withdrawn more than 1 billion euros over the past week, a report which the Spanish government denied.
Adding to concerns about the region, Spain's borrowing costs shot up at a bond auction. Bankia shares fell 14% in European trading after sliding as much as 30% earlier.
News that some Greek banks face emergency funding needs hurt sentiment and caused a further decline in risk assets, which have dropped over recent weeks. The CBOE Volatility Index .VIX jumped 9.3% and hit its highest level since mid-December.
With a pattern of brief gains during recent trading sessions fizzling quickly, bulls saw little reason to fight the selling pressure.
"Everyone is inclined to sell into rallies rather than buy into dips, find any excuse to sell," said Terry Morris, senior equity manager for National Penn Investors Trust Company in Reading, Pennsylvania.
After the closing bell, Gap Inc shares jumped 6% to USD 27.89 after the clothing retailer reported first-quarter earnings that topped Wall Street expectations and boosted its yearly profit forecast.
Facebook Inc priced its initial public offering at USD 38 per share, giving the world's No. 1 online social network a USD 104 billion valuation in the third largest offering in US history. The stock begins trading on Friday on the Nasdaq.
The Nasdaq fell on weakness in tech shares. Apple Inc lost 2.9% to USD 530.12 and Qualcomm Inc fell 3.3% to USD 57.16.
Dollar Tree fell 6.1% to USD 95.13 and was one of the biggest percentage decliners on the Nasdaq 100 .NDX after giving a second-quarter profit outlook that was below expectations.
The S&P has fallen 6.1% so far in May, and while volatility is expected to continue, the persistence of the losses have some analysts forecasting a near-term rebound.
Wal-Mart shares advanced 4.2% to USD 61.68 after the world's largest retailer reported better-than-expected quarterly profit.
Sears Holdings Corp gained 3.1% to USD 52.42 after the company said it plans to spin off a large part of its stake in its Canada unit to better focus on its US business.
GameStop Corp tumbled 11.1% to USD 18.52, the biggest percentage decliner on the S&P, after it forecast second-quarter earnings that were below expectations.
Volume was heavy with about 8.35 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, above the daily average of 6.81 billion.
Declining stocks outnumbered advancing ones on the NYSE by 2,652 to 412, while on the Nasdaq, decliners beat advancers 2,021 to 483.
ADS BY GOOGLE
video of the day
Dont see mkt going anywhere now; like Bharat Forge: Dipen