Stocks finished near session lows in choppy trading Wednesday, with the Dow posting its first three-day losing streak this year, amid lingering worries of Fed tapering.
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"We're starting to see the sentiment shift from 'buy the dips' to 'sell the strength,' but I'm not going to say this is the final nail in the coffin for this market," said Matt Cheslock, trader at Virtu Financial. "If we're down 1 percent and you're buying the dips, that's all you're going to lose and that's not so bad. The problem is that we used to be able to press this market a little bit more to get more downside and more of a flush—this is kind of a slow move for us."
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The Dow Jones Industrial Average tumbled 126.79 points, to close at 14,995.23, dragged by American Express and Home Depot. The index logged its first three-day losing streak this year. The blue-chip index opened up more than 100 points but quickly erased its gains. The index swung in a wide 260-point range.
The S&P 500 declined 13.61 points, to end at 1,612.52. And the Nasdaq tumbled 36.52 points, to finish at 3,400.43. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, spiked above 18.
All S&P sectors reversed their early gains to finish lower, dragged by consumer discretionaries and utilities.
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The dollar regained its footing against yen, after dropping as low as 95.16 earlier in the session. The dollar index, which measures the greenback's strength against a basket of currencies, touched its lowest level since February.
"Everyone's watching the yen," said Joe Saluzzi, co-manager of trading at Themis Trading. "Since 'Abenomics' took place in November, you can overlay the S&P 500 against the yen chart and see a nice correlation—so it makes sense to me that when the reverse happens, it should also happen in the stock market. The currency is the leader, not the laggard and it's all by central bankers."
Asian shares trimmed losses, after falling sharply in the previous session when the Bank of Japan refrained from introducing measures to ease market volatility. Financial markets in Hong Kong and China were shut on Wednesday for the Dragon Boat holidays, and will reopen on Thursday.
In Europe, shares traded higher after the German government encouraged the country's highest court to dismiss a legal challenge to the European Central Bank's government bond-buying program. German Finance Minister Wolfgang Schaeuble said he did not think the ECB had violated its mandate, and that ECB policy was not subject to German law.
The demonstration in Turkey grew more chaotic after police cleared Taksim Square early Wednesday. Prime Minister Tayyip Erdogan is expected to meet with the "organizers" of the anti-government protests which have spread throughout Turkey over the past two weeks.
"Riots in Istanbul, central banks raising stop signs, bond yields on the rise and equity markets skidding; brace yourselves, we are in for a very rough ride over the coming weeks," wrote Evan Lucas, market strategist at IG. "All this news has led to one thing and one thing only — high volatility. The current 'correction' in the market is heading towards a confidence killer, and this will only see volatility moving even higher."
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Data traffic management software maker Gigamon skyrocketed nearly 50 percent in its trading debut on the New York Stock Exchange. The company sold 6.75 million shares at $19 each, raising nearly $128 million.
Hewlett-Packard rallied after CEO Meg Whitman told CNBC that revenue growth is "still possible" for the computer maker in its fiscal year 2014, but added the performance of the overall PC market is a wild card.
Yum Brands ended flat a day after the fast-food chains operator reported a 19 percent drop in China same-store sales in May. China is responsible for about half the sales for Yum, the parent of the KFC, Taco Bell, and Pizza Hut restaurant chains.
Rambus soared after the company settled a patent case with South Korea's SK Hynix, which will pay the rival chipmaker $240 million.
Lennar gained after Keefe Bruyeett & Woods upgraded the homebuilder to "outperform" from "market perform."
GlaxoSmithKline rose after the pharmaceutical giant dismissed its head of research and development in China, following an investigation that determined data used in a 2010 research paper was misrepresented.
Pfizer advanced after the drugmaker said rival Teva Pharmaceuticals and Sun Pharmaceutical Industries would pay $2.15 billion to settle a patent infringement lawsuit related to its acid-reflux drug Protonix.
Meanwhile, the Financial Times reported that Apple bonds had fallen by up to 9 percent in value in under six weeks.
Treasury prices declined after the government sold $21 billion in 10-year notes at a high yield of 2.209 percent. The bid-to-cover ratio, an indicator of demand, was 2.53.
Weekly mortgage applications rose for the first time in a month as a surge in interest rates pushed prospective home buyers to act, according to the Mortgage Bankers Association.
—By CNBC's JeeYeon Park. Follow JeeYeon on Twitter: @JeeYeonParkCNBC
Coming Up This Week:
THURSDAY: Jobless claims, retail sales, import & export prices, business inventories, natural gas inventories, 30-yr bond auction, Fed balance sheet/money supply, Groupon shareholder mtg; Earnings from Casey's General Store
FRIDAY: Producer price index, current account, industrial production, consumer sentiment
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