Stocks sank in the last half hour of trading Thursday to close near the session's lows after a batch of economic reports failed to provide traders with enough optimism to continue a September rally.
The Dow Jones Industrial Average fell 76.89 points, or 0.7 percent, to 10,662.42. Walt Disney and General Electric , were the top laggards, while Hewlett-Packard and Alcoa rose.
After reaching an intraday high of nearly 1137, the S&P 500 fell 9.45 points, or 0.8 percent, to 1,124.83. The Nasdaq, which had been in positive territory most of the day thanks to a boost in technology stocks, fell 7.47 points, or 0.3 percent, to 2,327.08. The CBOE Volatility Index, widely considered the best gauge of fear in the market, jumped more than 6 percent, to nearly 24.
The top 10 key S&P sectors fell, including technology, which had been higher most of the day.
Large financials fell including Goldman Sachs and Morgan Stanley , following earnings cuts by Bank of America Merrill Lynch and Rochdale Securities. Bank of America also cut Citigroup's 2010 earnings-per-share view to 39 cents a share from 41 cents, although it said the bank, as well as JPMorgan, have a business mix that makes them better positioned for a slower third quarter.
The tech sector jumped, led by Red Hat, which soared more than 10 percent after the world's biggest provider of Linux software reported lower second-quarter profit, but beat forecasts on a sharp increase in software sales. In addition, at least three brokerages raised their price targets on the firm.
Nvidia also soared after BMO raised the graphics processor designer to "outperform" from "market perform," and boosted its price target to $16 a share from $9, citing improvement in market share and stabilization in its discrete graphics business.
Apple shares rose after Caris raised its price target on the iPod maker to $375 from $325.
Meanwhile, shares of Novell sagged on reports the auction of the company's Netware and identity management products are dragging, according to Reuters.
Newspaper stocks jumped after the Washington Post announced it would buy back about 10 percent of the publisher's class B common stock. The New York Times and McClatchy also rose.
Consumer stocks got a boost from Bed Bath & Beyond,which rose after the home goods retailer beat profit and sales estimateson stronger sales.
Tiffany, however, slid after Goldman Sachs cut the luxury jeweler's rating to "sell" from "neutral."
In other earnings news, shares of Rite Aid plunged after the drug-store chain reported a wider-than-expected lossand issued a bleak outlook for the rest of the year.
And Vail Resorts declined after the ski resort operator reported a wider-than-expeected loss because of a smaller tax benefit to its real-estate portfolio, and a grimmer outlook for the new year than anticipated.
Sportswear and equipment supplier Nike is scheduled to report earnings after the bell Thursday.
Netflix rose after rival Blockbuster filed for bankruptcy, citing a shift in consumer preferences to downloading movies from the Internet.
Shares of Avis slipped after the rental car company raised its offer for Dollar Thrifty to about $1.52 billion, more than Hertz's offer of about $145 billion.
Abbot Labs voluntarily recalled baby formula after beetles were found in the products and in a Michigan plant where they are made. Abbot said addressing the issue will cost about $100 million.
Meanwhile, Bionovo shares soared more than 50 percent after health regulators accepted the chemistry, manufacturing and controls plan for the pharmaceutical firm's lead drug candidate, Menerba, an experimental treatment for hot flashes related to menopause.
McDonald'ssaid it would increase its quarterly dividend by 11 percent.
Scholastic rose after the children's bookpublisher agreed to buy back up to $150 million shares in a modified Dutch auction.
Meanwhile, cigarette makers Lorillard and Altria slipped after Stifel Nicolaus downgraded the companies to "hold" from "buy."
Volume was light, with 3.8 billion shares changing hands on the consolidated New York Stock Exchange. On the NYSE floor, less than a billion shares changed hands, with decliners outpacing advancers 7 to 3.
In the day's economic news, existing home sales rose 7.6 percent in August, and the index of leading indicators gained 0.3 percent, more than expected.
In addition, a surprising jump in jobless claims sent stocks skiddinga day after stocks closed loweracross the board.
On Tap This Week:
FRIDAY: Durable goods orders; New home sales; Richmond Fed President Lacker speaks; Philadelphia Fed President Plosser speaks; NY Film Festival; Earnings from KB Home .
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