Stocks accelerated their losses in the final hour of trading to close lower Wednesday, amid ongoing nervousness over the euro zone and after credit-rating agency Egan-Jones downgraded Spain's credit rating to CCC+ from B.
Egan-Jones' latest downgrade for Spain mark's the fourth from the ratings agency since April.
The Dow Jones Industrial Average dropped 77.42 points, or 0.62 percent, to close at 12,496.38 after struggling between small gains and losses for most of the session.
The S&P 500 slipped 9.30 points, or 0.70 percent, to end at 1,314.88. The Nasdaq slid 24.46 points, or 0.86 percent, to finish at 2,818.61.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, jumped to close above 24.
Most key S&P sectors finished lower, led by consumer discretionary and materials. Telecoms squeezed out a small gain.
JPMorgan CEO Jamie Dimon apologized for the bank's $2 billion trading loss, and told the Senate Banking Committee that it was an "isolated incident." The CEO was jeered by angry protestors ahead of his testimony. Shares added to gains following the hearing, but are still down almost 15 percent since the loss was revealed on May 10. Meanwhile, Oppenheimer cut its price target on the bank to $56 from $58.
European shares ended lower as investors hesitated to jump in amid the ongoing tension in the region and ahead of the Greek election over the weekend. Adding to woes, Greek bankers said up to 800 million euros ($1 billion) were exiting major banks daily.
“The headline risk in the market is at the highest I’ve ever seen and reactions are extremely temperamental,” said Keith Bliss, senior vice president at Cuttone & Co. “[The volatility] will certainly continue through at least the Presidential election…There’s going to be a lot of choppiness leading up to that and I definitely don’t think we’ll reach any type of viable resolution in Europe for a long time.”
Target raised its quarterly dividend to 36 cents a share from 30 cents a share.
Dell jumped to lead the S&P 500 gainers after the PC maker announced it will offer shareholders a dividend of 32 cent a share per year, or 8 cents a quarter.
Johnson & Johnson advanced after the drugmaker said it expects the $19.7 billion acquisition of Swiss medical device maker Synthes to slightly boost profit this year. In addition, at least three brokerages raised their rating on the company.
Scotts Miracle-Gro tumbled after the lawn care and service company said it would miss its full-year outlook on weak demand during the peak gardening season. In addition, RBC slashed its price target on the firm to $38 from $48.
Zynga rose slightly after
On the economic front, producer prices tumbled 1 percent in Mayas energy costs fell the most since March 2009, according to the Labor Department.
Retail sales fell for a second month, slipping 0.2 percent in May, according to the Commerce Department. Meanwhile, business inventories rose 0.4 percent to a record $1.58 trillion in April, pointing to continued careful management of stocks.
Oil prices hit their lowest level since last October,even after the EIA's inventory data showed crude supplies declined last week. Investors will be waiting for headlines from the OPEC meeting later this week.
Treasury prices extended their gainsafter the government auctioned $21 billion in 10-year notes at a high yield of 1.622 percent and bid-to-cover of 3.06.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
THURSDAY: CPI, jobless claims, current account, 30-yr bond auction, AOL shareholders mtg; Earnings from Kroger, Smithfield Foods, Pier 1 Imports
FRIDAY: Empire state mfg survey, treasury int'l capital, industrial production, consumer sentiment, credit card default rates reported, quadruple witching
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