U.S. stocks fell Wednesday as Germany's move to ban some naked short-selling fueled a fresh wave of worry about financial regulation.
Industrials were the day's worst performers, along with energy and utilities. Financials were the best performers.
The Dow Jones Industrial Average shed 66.58, or 0.6 percent, to close at 10,444.37. Caterpillar and Boeing were the biggest decliners.
The S&P 500 fell 0.5 percent and the Nasdaq lost 0.8 percent. The CBOE volatility index, widely viewed as the best gauge of fear in the market, was just shy of 35 at the closing bell.
Bank of America and JPMorgan were among the top gainers on the Dow.
European stocks ended at their lowest level in nearly two weeks, led by banks, amid rising tensions over Germany's ban on some naked short sellingon Tuesdayand the impact of Greece and other nations with heavy debt loads on the European Union.
That also triggered concern about reform in the U.S., particularly as Congress starts preliminary votes on reform legislation and the SEC releases proposed curbs on single-stock trading.
"Wall Street is against regulation and anything that tempers the normal course of the markets," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
The euro clawed backagainst the dollar and other currencies amid buzz in the market that Greece is considering leaving the EU. A spokesperson for Greece categorically denied the debt-riddled nation is considering such a move. arlier, the euro hit a four-year low against the dollar after German Chancellor Angela Merkel said the euro was in danger.
Oil rose but still settled below $70 a barrelafter a report showed crude inventories rose by just 200,000 barrels last week, far less than expected. Gold continued its descent to back to earth, falling below $1,200 an ounce. The precious metal recently went as high as $1,250.
Minutes from the last Fed meeting show policy makers had a slightly better view of the economy in April than they did at the beginning of the year. Fed officials said the economy can grow between 3.2 percent and 3.7 percent this year — an upward revision from a growth range of 2.8 percent to 3.5 percent in their January forecast.
In addition, the Fed sees the unemployment rate, now at 9.9 percent, dipping to between 9.1 percent and 9.5 percent by year-end.
Hewlett-Packard advanced after the company beat earnings expectations and raised its full-year outlook. Analysts are mixed: At least two brokerages raised their price targets on the stock, while two lowered their targets.
Target also topped forecastsas consumers have begun to spend more on discretionary items such as clothing and electronics. S&P Equity raised its rating on the stock to "buy" from "hold."
Goldman Sachs raised the ratings of a number of retailers, including Target, Home Depot and Macy's to "buy."
Lawnmower maker Deere also topped forecasts and raised its full-year outlook.
Shares of Visa , MasterCard and Capital One ended mixed after being hammered on Tuesday. The credit-card networks have been under pressure amid fears that financial reform that could give more power to the Fed to regulate card feeswould hurt profits.
Elsewhere in the financial sector, Ambac Financial dropped over 5 percent after the bond insurer reported a wider quarterly loss on Tuesday.
Zions Bancorp declined after the regional bank announced a public offering of $150 million of warrants to acquire its common stock as part of its capital-raising plans.
Chips started to claw back after see-sawing earlier. The sector took a beating on Tuesday amid buzz that overseas sales of computers and gadgets may not live up to expectations.
Still, Sterne Agee initiated coverage of Apple with a "buy" ratingand slapped a $300 price target on the stock, saying it doesn't see a slowdown for the iPhone and iPad maker.
On the M&A front: Yahoo shares fell after the search engine firm said it agreed to acquire Associated Contentto add more pages to attract advertisers.
Symantec is close to acquiring VeriSign’s widely used technology for securing payments over the Internetin a deal worth $1.3 billion, according to sources.
Google is also buying Oslo-based Global IP Solutions for $68 million to build its real-time audio and video Internet capabilities.
Also, Google surpassed Microsoft in the battle over the software that runs cell phones.
Homebuilders got a boost after Goldman Sachs raised its price targets on several stocks in the sector, including Lennar , KBHomes and Pulte .
In the day's economic news: Consumer prices slipped 0.1 percentin April and were flat excluding volatile food and energy costs. This came after the Labor Department reported Tuesday that the producer price index rose 0.2 percent last month.
And some dismal news on the housing front: Mortgage applications tumbled more than 27 percentto their lowest level since May 1997 as the government stimulus expired, and one in seven U.S. mortgages is now delinquent or headed for foreclosure.
Volume was above average, with 1.6 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers, roughly 4 to 1.
Still to Come:
THURSDAY: Toyota/NHTSA hearing; BOJ monetary policy meeting; weekly jobless claims; leading indicators; Philadelphia Fed survey; earnings from Computer Sciences, Gamestop, Staples, Dell, Gap
FRIDAY: Earnings from Ann Taylor
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