Stocks retreated after Wednesday's big rally after Microsoft delivered a round of bad news and economic reports reflected a steepening recession.
The Dow Jones Industrial Averageshed more than 200 points, or about 2.5 percent, after gaining 3.5 percent in the prior session. The S&P 500and Nasdaq each lost more than 2.5 percent.
It’s been a tumultuous month so far for the major U.S. indexes—the Dow has lost nearly 10 percent in January alone.
Microsoft fell to its lowest level since 1998, making it one of the biggest decliners on the Dow, after the software giant missed Wall Street's earnings target and said it would cut up to 5,000 jobs. The company also curtailed its forecasts for the rest of its fiscal year.
Citigroup maintained its grip on the bottom spot on the Dow after the company late Wednesday named former Richard Parsons as its chairman. Parsons is the former CEO of Time Warner.
A quick burst of enthusiasm for Bank of America, generated by news that CEO Ken Lewis snapped up more stock, lost steam and shares tumbled to the second lowest spot on the Dow, just above Citi.
Merrill's John Thain resigned from the newly-merged company after a meeting with Lewis. Bigger-than-expected losses from Merrill have been at the heart of Bank of America's recent pain that led to its first quarterly loss in 17 years.
The buzz in the market isn't about will-he-stay-or-will-he-go, it's about holy cow, did you see how much he spent when he was there?!!! Apparently, Thain had his office redesigned a year ago, with some eye-popping spending, including $1,400 on a garbage can!
JPMorgan Chase also joined the banks in their wallowing even as CEO Jamie Dimon late Wednesday announced plans to buy more stock in the company.
A slew of regional banks reported this morning, missing estimates with huge losses. Among them were Fifth Third and SunTrust , which saw their shares tumble.
Economic reports out before the bell just added to the malaise: Housing starts dropped 15.5 percentto a record annual pace of 589,000 units in December; analysts had expected a less-severe drop to a rate of 610,000 units.
Initial jobless claims jumped by 62,000 last week to 589,000. Analysts had expected just 540,000 claims.
Apple shares jumped after the company beat earnings expectations amid strong iPod and Mac sales during the holiday quarter.
But it wasn't all fun and games in tech land: eBay skidded after the Internet auctioneer reported its profit fell 31 percent and issued a disappointing forecastfor the current quarter.
American depositary shares of Nokia tumbled more than 10 percent after the Finnish handset maker reported a 69-percent drop in earnings and issued a tepid outlook for the year ahead.
This comes a day after Intel announced plans to shut sites in Asia and reduce its presence in the U.S. The move could affect as many as 6,000 jobs, but Intel said not all of the 6,000 jobs would be lost.
UnitedHealth reported its profit dropped 40 percent but met analysts' target.
Still to Come:
THURSDAY: Senate panel mulls Geithner nomination; Earnings from AMD, Capital One after the bell
FRIDAY: Natural-gas inventories; Earnings from GE, Harley-Davidson and Xerox
ALL WEEK: Detroit Auto Show (Jan. 11-25)
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