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Dow Loses 10% in Q2; S&P Ends Below 1,040

Stocks ended their worst quarter in over a year with a selloff Wednesday after a disappointing report on private-sector employment in the U.S.

The Dow Jones Industrial Average shed 96.28, or 1 percent, to close at 9,774.02. Just one of the 30 components finished higher — 3M .

The Dow lost 10 percent in the second quarter, the worst quarter since the first quarter of 2009 — and the first quarterly decline since then.

"Just pushing all the garbage off the side of the ship" is how Peter Kenny, managing director at Knight Equity Markets, described it in an interview with Reuters.

Plus, a lot of investors piled into their short positions, betting there will be some turbulence ahead.

The S&P 500 finished below the key 1,040 mark, raising concerns that the next stop could be 1,000 or 950.

The CBOE volatility index, widely considered the best gauge of fear in the market, was above 34 at the closing bell.

It was a brutal quarter all around: Housing stocks finished down 21 percent, materials shed 16 percent, financials dropped 14 percent and both energy and industrials lost 13 percent.

Well, unless you had invested in gold: Spot gold rose $132.20, or 12 percent, during the quarter to $1,245.50 an ounce.

The big drag today was worries about jobs after ADP said the private sector added just 13,000 jobs in June, well below expectations.

The report is closely watched ahead of the government's jobs report, due out on Friday. Economists expect to see 110,000 jobs were lost from nonfarm payrolls in June, according to the latest Reuters survey, which would snap a five-month streak of gains.

This came after a reading on Chinese leading indicators fell short and the IPO for China's third-largest bank priced below expectations on Tuesday, raising concerns about the global recovery.

Financials ended lower after leading the market earlier following news that European banks borrowed less from the European Central Bank than expected and that Democrats have agreed to drop the $18 billion tax on banks in the financial-reform legislation and will look for other means to fund the bill.

Meanwhile, the Financial Crisis Inquiry Commission begins its two-day hearings on derivatives — especially those sold by Goldman Sachs and AIG — and the role of derivatives in the financial crisis.

BP shares rose as optimism grew that the Gulf oil spill would be under control soonand on belief that the company may draw interest in a takeover deal.

In fact, oil exploration firms overall did well as investors scooped up some beaten-down names in the sector.

Shares of electric-car maker Tesla ened slightly lower after jumping 40 percent on their debut Tuesday.

Ford shares rose 2 percent after the auto maker said it has paid off nearly $4 billion in debtand is on track for "solid profits" this year.

Netflix shares skidded 3.5 percent following news that Hulu will begin charging a subscription fee of $9.99 a month for access to its library of TV shows and movies.

Verizon skidded over 2 percent a day after a report in Bloomberg that the company may start selling an Apple iPhone using Verizon as the provider as early as January. Verizon said it would neither confirm nor deny the report.

A lot of activitiy on the M&A front:

Dow component Boeing will pay $775 million for Argon in a bid to grow its sensors, communication technologies and information management capabilities.

In biotech, Celgene has agreed to buy Abraxis Bioscience for at least $2.9 billion in cash and stock. The move will expand Celgene's cancer drug portfolio.

Drug giant Sanofi Aventis said it intends to buy TargeGen for $560 million to expand its offering of oncology products.

AstraZeneca scored a victory in its Crestor patent case, causing a slew of analysts, including those at Morgan Stanley and UBS, to raise their view of the company. But after a 9 percent rally Tuesday, shares cooled off this morning, dropping nearly 1 percent in premarket trading.

Volume was a little heavier than usual, with over 1.4 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers, roughly 19 to 11.

Still to Come:
THURSDAY: Weekly jobless claims; ISM manufacturing index; construction spending; pending-home sales; June auto sales
FRIDAY: June jobs report; factory orders

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