MARKET SNAPSHOT: U.S. Stocks Hammered As Fears About Quarterly Results Intensify

By Anora Mahmudova and Barbara Kollmeyer, MarketWatch

Tech and biotech stocks lead losses on Wall Street

NEW YORK (MarketWatch) -- U.S. stocks were bludgeoned in Wednesday trading with the Dow threatening a 300-point drop as the Nasdaq Composite suffered its steepest decline since April 2014 as investors dumped technology and biotechs shares.

The carnage on the Street marks the third consecutive losing session, with the S&P 500 and Dow industrials recording the sharpest losses in two weeks and occurred as one of the year's biggest mergers, a deal between Kraft Foods Group Inc. and H.J. Heinz Co., was announced in the morning.

Analysts attributed the selloff to pre-earnings season jitters and investors cashing out of stocks in companies that have seen big run-ups.

The Nasdaq Composite (RIXF) ended the day down 118.21 points, or 2.4%, at 4,876.52.ost 19.06 points, or 0.9%, to 2,072.44. Biotechnology stocks were hit the hardest, with the iShares Nasdaq Biotechnology ETF (IBB) dropping 4.1%.

The S&P 500 (SPX) fell 30.45 points, or 1.5% to 2,061.05, with nine of its 10 main sectors finishing sharply lower. Energy sectors stocks defied the trend and followed a rally in oil prices higher sparked by an intensifying conflict in Yemen.

The Dow Jones Industrial Average (DJI) lost 292.60 points, or 1.6% to 17,718.54, and turned negative for the year. All but two of its 30 components closed lower.

Quincy Krosby, market strategist at Prudential Financial, said investors are beginning to fret about first-quarter earnings and fear the disappointment will be worse than expected.

"Traders began buying protection from downside, which means they are very nervous," Krosby said, pointing to a jump in the implied volatility as measured by the CBOE volatility index, which rose 13% to 15.42.

"Investors have been selling top-performing, high-beta stocks for several sessions now, so people owning biotechs and high-flying tech stocks decided to lock in profits and exit before the earnings season began," Krosby said.

John Manley, chief equity strategist at Wells Fargo Advantage Funds, also attributed the selling action to the jitters stemming from uncertainty about the Fed policy and expectations that earnings would be poor.

"Typically, high-multiple stocks, such as biotechs and technology stocks get clipped badly during such times," Manley said.

"There are also concerns that the Fed might be tightening too soon, given very weak growth we are experiencing," Manley added.

One sign of that economic softness was durable good orders, released ahead of the start of trading on Wednesday, which fell more than expected (http://www.marketwatch.com/story/february-durable-goods-orders-drop-14-in-weak-report-all-around-2015-03-25) in February, suggesting businesses remain reluctant to invest more aggressively.

Dan Greenhaus, chief global strategist at BTIG, said the market is still digesting economic reports in the wake of a Federal Reserve that said it would be "data dependent" in determining the pace of its first rate hike in nine years.

"Today's durable-goods orders were in line with poor data of late, which suggest that the first-quarter GDP will be weak," Greenhaus said.

Stocks to Watch: Shares of Kraft Foods Group Inc.(KRFT) surged more than 36% after a merger was announced with H.J. Heinz Co (http://www.marketwatch.com/story/kraft-and-heinz-to-merge-in-deal-to-create-company-with-revenue-of-28-billion-2015-03-25).

Shares of Kofax Ltd.(KFX) were up 46% after the software company agreed to be acquired by Lexmark International (LXK) late Tuesday.

For more on notable movers, read Movers & Shakers column (http://www.marketwatch.com/story/red-hat-apollo-education-pvh-earnings-in-focus-2015-03-24).

Other markets: European stocks ended lower. In Asia, the Shanghai Composite Index snapped a 10-day winning streak, and the Japan Nikkei 225 index edged up 0.2%.

The dollar (DXY) shifted slightly lower Wednesday after data showed German business confidence rose in March (http://www.marketwatch.com/story/ifo-german-business-confidence-rises-again-2015-03-25) for the fifth straight month, hitting its highest level since July 2014.

Oil prices (CLK5) settled above $49 a barrel on Wednesday as turmoil in Yemen raised concerns over crude supplies in the Middle East. Gold prices (GCK5) rose for a sixth straight session, gaining $5.60, or 0.5%, to settle at $1,197 an ounce.

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