Stocks hit by biotech; Nasdaq drops 2.5 percent

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U.S. stocks were slammed on Thursday, with biotechnology and technology shares resuming declines that had both the Dow and the Nasdaq Composite down triple digits, as investors fled high-flying technology and biotech shares in favor of defensive plays.

“Clearly investors are nervous about high-flying momentum stocks. There is a rethink on whether better earnings and economic data will support a resumption of the momentum that was driving biotechnology and higher-flying technology stocks earlier in the year,” said Kate Warne, investment strategist at Edward Jones.

“We’re back to a valuation focus; investors are gravitating towards something tangible, like earnings and revenue,” said Jack Ablin, chief investment officer at BMO Private Bank.

Momentum stocks including Tesla MotorsFacebookGooglePriceline Group and Amazon.com declined, along with biotechnology companies, with Pacific Biosciences of California, Zogenix and Chemocentrys among those slammed.

“We’re entering earnings season and they are not going to have much to show,” said Ablin of new technology and biotech firms that have seen their shares run-up on bets for future performance.

“Investors want to see earnings and cash flow,” he added.

EBay fell after reaching an accord with activist investor Carl Icahn to halt his proxy battle by saying it would appoint, at Icahn’s urging, an independent director to its board. Family Dollar Stores slid after saying it would cut jobs and close hundreds of stores as the discount retailer struggles to reverse declining sales.

Rite Aid gained after the drugstore chain projected full-year revenue that beat expectations; Bed Bath & Beyond declined after forecasting quarterly profit beneath estimates. Shares of Ally Financial fell as the former financing arm of General Motors made its market debut.

Name Price Change %Change
DJIA Dow Jones Industrial Average 16282.34
-154.84 -0.94%
S&P 500 S&P 500 Index 1846.66
-25.52 -1.36%
NASDAQ Nasdaq Composite Index 4084.10
-99.80 -2.39%

The Dow Jones Industrial Average fell as much 160.81 points, or 1 percent, at 16,276.37. American Express led declines that included 24 of 30 blue-chip components.

The S&P 500 declined 22.45 points, or 1.2 percent, to 1,849.73, with health care and technology the hardest hit and telecommunications and utilities the best performing of its 10 major industry groups.

The Nasdaq Composite declined 104.05 points, or 2.5 percent, to 4,079.84.

The CBOE Volatility Index, a gauge of investor uncertainty, rose 9.8 percent to 15.18.

For every stock rising, more than two fell on the New York Stock Exchange, where 307 million shares traded as of 12:30 p.m. Eastern. Composite volume neared 1.6 billion.

The dollar turned lower against the currencies of major U.S. trading partners; the 10-year Treasury yield used in determining mortgage rates and other consumer loans fell 6 basis points to 2.63 percent.

On the New York Mercantile Exchange, gold futures for June delivery gained $14.40, or 1.1 percent, to $1,320.30 an ounce, while crude-oil futures for May delivery fell 11 cents, or 0.1 percent, to $103.49 a barrel.

The Labor Department reported jobless claims dropped to the lowest level in nearly seven years, with initial claims for state unemployment benefits dropping 32,000 to 300,000 last week, below expectations and the lowest since May 2007.

A separate report had import prices rising 0.6 percent last month after an unrevised 0.9 percent in February.

On Wednesday, stocks rallied after minutes from the Federal Reserve’s last session overrode worries about the timing of future interest rate hikes by the central bank.

—By CNBC’s Kate Gibson

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