By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks fell sharply on Wednesday
to reclaim much of the prior day's advance, with sentiment hit by
disappointing company results and an Apple Inc. supplier's tepid
outlook.
"In this environment you don't want to miss, you want to beat
and guide higher," said Phil Orlando, equity strategist at
Federated Investors, citing Intel Corp. (INTC) and Bank of America
Corp.'s (BAC) quarterly earnings reports.
"We came into this week with a pattern of weaker-than-expected
data, a horrific tragedy in Boston, and the China demand story, all
at the beginning of a lackluster earnings season," offered Art
Hogan, market strategist at Lazard Capital Markets.
"We may have 60% of companies beating numbers because
expectations are so low. And Apple is down not because of earnings,
but because of someone else's earnings," Hogan added.
Shares of Apple supplier Cirrus Logic Inc. (CRUS) plummeted
nearly 16% after the chip maker offered a weak first-quarter
revenue outlook and DigiTimes reported that iPad mini shipments
would fall as much as 30% in the second quarter.
After a 195-point slide, the Dow Jones Industrial Average (DJI)
finished at 14,618.59, down 138.19 points, with B. of A. (BAC)
pacing the index's declines that had all but four of its 30
components in the red.
B. of A. shares slid 4.7% after the lender reported
first-quarter earnings below Wall Street's estimates as its
mortgage business weighed.
Caterpillar Inc. (CAT) fell 1.4% after Macquarie downgraded the
construction-equipment maker to neutral from outperform.
The S&P 500 index (SPX) shed 22.56 points to 1,552.01, with
the technology and energy sectors weighing most heavily.
The technology-heavy Nasdaq Composite (RIXF) declined 59.96
points to 3,204.67. Apple fell as low as $398.11, its first foray
under $400 since September 2011, and closed off 5.5% at
$402.80.
Bank of New York Mellon Corp. (BK) declined 2.1% after reporting
a first-quarter loss and adjusted earnings that missed
estimates.
Fairway Group Holdings Corp. (FWM) rallied nearly 34% in its
market debut, after the New York grocer's initial public offering
reportedly got off to a strong start late Tuesday.
Shares of rival Whole Foods Market Inc. (WFM) fell 1.4%.
Textron Inc. (TXT) lost more than 13% after the firm forecast a
drop in business-jet deliveries and reported a first-quarter profit
beneath estimates.
Yahoo Inc. (YHOO) edged lower after Bank of America Merrill
Lynch upgraded the Internet company to buy from neutral, a day
after Yahoo forecast second-quarter sales below expectations.
For every stock that rose, nearly four fell on the New York
Stock Exchange, where 866 million shares traded.
Composite volume surpassed 4.2 billion.
Equities had come off session lows after the Federal Reserve's
Beige Book found the U.S. economy to be growing at a "moderate"
pace and some media outlets reported that a suspect in the Boston
marathon bombings was in custody. However, the Boston police
department later said on its Twitter account that no arrest had
been made.
On the New York Mercantile Exchange, oil prices (CLK3) fell
under $87 a barrel after government data had production rising and
demand for gasoline down for a second week.
Gold edged lower (GCM3) to end at $1,382.70 an ounce.
On Monday, weak growth numbers from China set off a selloff in
commodities, with benchmark crude for May delivery falling 3% and
gold tallying its largest one-day drop in three decades.
"The amazing thing is how bipolar this market has become. Just
look at the last three days, first we had liquidation day Monday,
with all asset classes sold, then the rally, and now we're giving
back yesterday's gains," said Hogan.
The Financial Times on Wednesday reported a senior auditor in
China had cautioned that escalating local government debt could
bring on a larger financial crisis than the U.S. housing market
crash.
The dollar (DXY) gained against other currencies and Treasury
yields fell, with the benchmark 10-year note (10_YEAR) at
1.703%.
Speculation that Germany could lose its triple-A rating hammered
German stocks, with the U.S. market following suit.
"Our desk identified some tweet or something that hit at four
this morning that suggested that Germany's government finances were
under review for a possible downgrade," said Federated's
Orlando.
"We don't know if this is legitimate, but the bottom line is in
the middle of the night our time European markets went into a
tailspin," he said.
"We won't know if that is true until it is, but if there is a
concern that the economic slowdown is going from the periphery to
the core, that changes our impression of the overall European
economy," said Lazard's Hogan.
On Wednesday afternoon, Egan-Jones Ratings Co. downgraded
Germany to A from A+. Egan-Jones is not among the top three ratings
agencies.
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