Apple iOS issues help to push markets down
A software upgrade for the computer giant caused problems for iPhone users, and subsequently investors on Wall Street Thursday.
The' N. Pham, The Virginian-Pilot/AP/File
A stumble by Apple set off a rout in the stock market Thursday, its worst day in nearly two months.
The selling started early and picked up strength in the afternoon. By the close of trading, all 30 big companies in the Dow Jones industrial average and the 10 industries in the Standard & Poor's 500 index lost ground.
Most investors said the drop wasn't a sign of worry as all the forces behind the market's long rally remain in place. It was only a week ago that the S&P 500 touched a record high, and strong runs are usually followed by short breaks. The index has lost 2 percent this week but is still up 6 percent for the year.
"There's just an absence of real news to chew on," said Mark Luschini, the chief investment strategist at Janney Montgomery Scott. "When you're at a peak, markets need more and more good news to keep climbing."
The S&P 500 index lost 32.31 points, or 1.6 percent, to close at 1,965.99.
The Dow slumped 264.26 points, or 1.5 percent, to close at 16,945.80. The Nasdaq composite, which is dominated by technology companies, dropped 88.47 points, or 1.9 percent, to 4,466.75.
It was the worst day for all three indexes since July 31.
Technology companies were hit hardest. Apple dropped nearly 4 percent following its announcement late Wednesday that it had pulled a software update which prevented users from making phone calls. Others complained that they bent their new iPhones by sitting on them. Apple lost $3.88 to $97.87 in heavy trading.
Two economic reports out Thursday were little help. Claims for unemployment benefits crept up last week. But the less volatile four-week average fell for the second straight week. A separate report said businesses orders for equipment plunged last month, mainly a result of a drop in orders for commercial aircraft.
"The economic numbers were negative, but not alarming and don't change the direction of the economy at this time," said Peter Cardillo, chief market economist at Rockwell Global Financial.
Henry Smith, chief investment officer at Haverford Trust, said there was no fundamental reason behind the big drop on Thursday. A sudden turn might seem alarming because it's so unusual.
"We've really had such little volatility for the past couple of years," Smith said. "Now when we have a 200-point drop in the Dow, it feels like something is really wrong."
Trading this week has turned increasingly turbulent, an abrupt break from a sleepy summer. On Monday, concerns about slowing growth in China and falling U.S. home sales knocked the market back, giving the S&P 500 its worst daily drop in more than a month. On Wednesday, the S&P 500 had its best gain in more than a month.
Some investment analysts have been warning that the market has been calm for too long and say a 10 percent drop, known as a "correction," is overdue. Since World War II, they typically hit every 18 months, according to S&P Capital IQ. The last one hit in August 2011.
"Big pullbacks are normal in a bull market," said Smith. "What's abnormal is that we've gone three years without one."
But Bill Strazzullo, chief market strategist at research firm Bell Curve Trading, thinks stocks could fall further as the S&P 500 nears 1,950. He said the money that investors poured into stocks when the index crossed above that mark could be pulled out.
"You could get people wanting to liquidate," Strazzullo said. "If you go below 1,950, the market can easily correct 10 percent, maybe more."
In Europe, Germany's DAX dropped 1.6 percent while the CAC-40 in France lost 1.3 percent. The FTSE 100 index of big British companies lost 1 percent.
The dollar has been gaining on other major currencies as traders expect the Fed will start raising its key interest rate next year. The world's other major central banks are expected to sit tight or take other steps likely to weaken their currencies. On Thursday, the euro fell 0.2 percent to $1.275. The dollar fell to 108.73 yen.
Prices for U.S. government bonds jumped, driving the yield on the 10-year Treasury note down to 2.50 percent from 2.57 percent late Wednesday.
In commodity trading, gold rose $2.40 to $1,221.90 an ounce. Silver slipped 26 cents to $17.44 an ounce and copper lost two cents to $3.03 a pound.
Benchmark U.S. crude oil sank 27 cents to $92.53 a barrel on the New York Mercantile Exchange.