By Anora Mahmudova, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks sold off on Tuesday as the
dumping of momentum plays, such as Twitter Inc. and economically
sensitive stocks, including some bank stocks, spreads to broader
markets. Financials and consumer discretionary stocks were hardest
hit on the S&P 500.
Even deal news, generally a positive for the market, failed to
lift prices. The calendar also didn't provide its usual support;
Tuesdays on the whole have been the strongest part of the week this
year.
The S&P 500 (SPX) ended the day at session lows, down 16.94
points, or 0.9%, at 1,867.72, with the financial and
consumer-discretionary sectors leading the decline. The Dow Jones
Industrial Average (DJI) dropped 129.53 or 0.8% to 16,401.02, with
27 of 30 members of the index closing in the red.
The Nasdaq Composite (RIXF) finished the day 57.30 points, or
1.4%, lower at 4,080.76.
Read the recap of MarketWatch's live blog of today's
stock-market action.
Joe Peta, managing director at Novus, a financial technology
company, says the selloff on the Nasdaq Composite was prompted by
two specific events: Expiration of the lock-up in Twitter Inc.
shares and public denouncement of the Athenahealth stock by David
Einhorn at the Ira Sohn investment conference.
"There is a clear rotation out of stocks that accumulated froth
-- namely biotech, Web 2.0 and social network companies. This
earning season showed that investors care about profits and
unprofitable companies were sold off to bring their PE ratios to
more normal levels," he added.
"Today's trading is very atypical. There is very little volume,
and deal news, which usually a positive for markets, is being
ignored," said Kim Caughey Forrest, senior equity analyst at Fort
Pitt Capital.
The sole U.S. economic report covered the trade deficit, which
narrowed in March to $40.4 billion, slightly above the consensus of
$40 billion.
Whole Foods Markets tumbles on earnings miss
Whole Foods Market Inc. (WFM) shares slumped 10.3% in
aftermarket action, after the grocer cuts outlook for sales and
profits.
Groupon Inc (GRPN) shares fell 3.3% in extended trading hours on
top of 2.5% losses on Tuesday after the company reported a wider
loss than expected.
Shares in Walt Disney Company (DIS) rose 2.2% after quarterly
results came above Wall Street's expectations.
Twitter Inc. (TWTR) shares tumbled 15% as hundreds of millions
of shares held by insiders became available for sale in the open
market.
Tesla Motors (TSLA) shares lost 4% ahead of the earnings results
scheduled for Wednesday after the closing bell. Read also: Momentum
stocks are taking a beating.
In deal news, Merck (MRK) agreed to sell its consumer-products
business, including the allergy-treatment Claritin and nasal
decongestant Afrin, to German drug maker Bayer AG for $14.2
billion. Shares fell 2.5%. Also read: Why the deal isn't helping
Merck shares.
Office Depot Inc. shares (ODP) surged 16% to $4.83, after the
electronics retailer raised its outlook for 2014 operating profit
and said it plans to close at least 400 U.S. stores by the end of
2016.
Shares of Athenahealth (ATHN) fell 14%, after David Einhorn of
Greenlight Capital said at a conference Monday that the
health-information technology firm is "overpriced" and "caught up
in a bubble."
American International Group (AIG) shares dropped 4.1% after the
insurer reported a substantial fall in first-quarter profit late
Monday.
Discovery Communications, Inc. (DISCA) shares dropped 3.9% after
disappointing first-quarter results. The owner of Discovery Channel
and Animal Planet said profit edge down 0.4% as higher expenses cut
into revenues.
European stocks end lower
European stocks reversed earlier gains and closed mostly
lower.
On Tuesday, the Organization for Economic Cooperation and
Development said the European Central Bank should immediately cut
its benchmark interest rate, to end a period of too-low inflation
in the euro zone.
Asian stocks were slightly higher, with Australia up after the
country's central bank held interest rates steady. Markets in
Japan, South Korea and Hong Kong were closed.
In the commodities markets Tuesday, gold (GCM4) futures fell
slightly. Crude for June delivery (CLM4) gained slightly but still
remained below the $100 a barrel level. Meanwhile, the pound
(GBPUSD) bought $1.6970 and traded at levels not seen since at
least 2009 after strong U.K. services data.
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