A day after stocks surged 3 percent in a broad rally, investors stepped back, and new concerns about Europe gave another reason to take profits.
After Tuesday's close, Oracle Corp reported earnings and sales that missed expectations for the first time
in a decade. The software giant joins a growing list of companies, including some of technology's biggest and oldest names, whose results and outlooks have raised alarm bells about business conditions.
The stock plunged 13 percent to $25.22 on heavy volume and was the top decliner in the Nasdaq 100. Shares of other tech companies also fell. IBM was the biggest drag on the Dow, down 4 percent at $179.80/ The Philadelphia semiconductor index fell 1.9 percent.
"Oracle is a tech story, but there's concern it could be a broader economic story," said Brad Sorensen, director of market and sector analysis at Charles Schwab in Denver.
"We're not ready to go that far yet, but it does show that businesses are unsure about the economic situation, especially with all the uncertainty about Europe."
Despite that, Sorensen said that a pullback in equities was to be expected coming off of Tuesday's gains, and that the light volume ahead of the Christmas and New Year's holidays would "make the moves a little more dramatic than normal."
The Dow Jones industrial average was down 43.10 points, or 0.36 percent, at 12,060.48. The Standard & Poor's 500 Index was down 3.60 points, or 0.29 percent, at 1,237.70.
The Nasdaq Composite Index was down 43.63 points, or 1.68 percent, at 2,560.10.
In Europe, investors worried that cut-rate loans from the European Central Bank's recent funding operation will not be used to buy Italian and Spanish debt, which would help lower elevated yields and reduce the pressure on refinancing for the debt-stricken countries.
European banks took nearly 490 billion euros in three-year cut-price loans from the European Central Bank on Wednesday.
Markets had run up ahead of the tender, but a widening of the yield spread between German and Italian debt suggested that money was not flowing where it is most needed.
An Italian banking group said banks would not increase their exposure to sovereign debt even after the ECB offering because European Bank Authority rules discourage it.
Ryan Larson, head of equity trading at RBC Global Asset Management in Chicago, said unconfirmed talk was circulating in the market that banks would use ECB loans to buy German bonds and not to support the debt of Spain and Italy.
"That kind of spooked the market," he said. "While it is a positive development in terms of the lending facility, there are still a lot of problems out there."
He said he was not able to confirm any of the market speculation.
Tuesday's rally had lifted the S&P 500 above its 50-day moving average. Many investors and traders are looking for a seasonal "Santa rally" into the end of the year and are keen to jump on any signs of momentum.
US-listed shares of Research in Motion Ltd jumped 9.2 percent to $13.67 and ranked among
the Nasdaq 100's top gainers after Reuters reported that Amazon and other potential bidders had been looking at making an offer for the BlackBerry maker, although interest had cooled somewhat.
The latest economic data showed sales of previously owned US homes surged in November, but revisions to data for the last four years gave proof that the housing market's recession was deeper than previously thought.
Shares of Walgreen Co lost 0.8 percent to $32.23 after the largest US drugstore chain posted lower quarterly
profit on pressured margins.
Contract electronics manufacturer Jabil Circuit Inc posted first-quarter revenue below estimates and sees lower
revenue in the second quarter. Shares fell 5.2 percent to $18.92.
