* Stocks on track for biggest two-day drop since November
* Initial jobless claims rise, Philly Fed well below
* VIX index above 15, euro-zone business activity
* Wal-Mart climbs after earnings, Safeway soars
* Dow off 0.4 pct, S&P 500 off 0.7 pct, Nasdaq off 1.1 pct
By Edward Krudy
NEW YORK, Feb 21 (Reuters) - U.S. stocks fell for a second
day on Thursday and gauge of investor concern hit its highest in
two months after reports cast doubt over the health of the U.S.
and euro-zone economies.
The second day of sharp declines in equity markets put the
S&P 500 on course for its worst two-day loss since November.
The CBOE Volatility Index or VIX, a measure of
investor fear, jumped 6.7 percent to 15.67.
Initial claims for unemployment benefits rose more than
expected last week while the Federal Reserve Bank of
Philadelphia said its index of business conditions in the U.S.
mid-Atlantic region fell in February to minus 12.5, the lowest
in eight months.
In Europe, business activity indexes dealt a blow to hopes
that the euro zone might emerge from recession soon, showing the
downturn across the region's businesses unexpectedly grew worse
"The PMI numbers out of Europe were really a blow to the
market," said Jack De Gan, chief investment officer at Harbor
Advisory in Portsmouth, New Hampshire.
"The market was expecting signs that recovery is still
there, but the numbers just highlighted that the euro-zone
problem is still persistent."
The abrupt reversal in markets, which started on Wednesday
after minutes from the Federal Reserve's January meeting
suggested stimulus measures may end earlier than thought, looks
set to halt a seven-week winning streak for stocks that had
lifted indexes close to all-time highs.
The Dow Jones industrial average dropped 53.87
points, or 0.39 percent, to 13,873.67. The Standard & Poor's 500
Index fell 10.30 points, or 0.68 percent, to 1,501.65.
The Nasdaq Composite Index lost 35.08 points, or 1.11
percent, to 3,129.33.
The two-day decline marked the U.S. stock market's first
sustained pullback this year. The Standard & Poor's 500 has
fallen 2 percent over the period, but is still up 5.2 percent so
far this year.
"The upside momentum in markets appears to be coming to an
end as we consolidate recent gains," said Adam Sarhan, chief
executive at Sarhan Capital in New York. "If the S&P breaks
under its 50-day moving average, something more serious could be
The S&P 500 would need to fall 1.9 percent to reach that
level of 1,473.62.
Wal-Mart Stores Inc shares gained 2.1 percent to
$70.66 and helped curb the Dow's decline after the world's
largest retailer reported earnings that beat expectations,
though early February sales were sluggish.
Wall Street will soon face another test with the upcoming
debate in Washington over the automatic across-the-board
spending cuts put in place as part of a larger congressional
budget fight. Those cuts, set to kick in on March 1 unless
lawmakers agree on an alternative, are expected to depress
Semiconductor stocks ranked among the weakest of the day,
pressuring the Nasdaq as the Philadelphia Semiconductor Index
fell 2.3 percent. Intel Corp fell 2.9 percent to
$20.13 while Advanced Micro Devices lost 6.7 percent to
$2.53 as the S&P 500's biggest percentage decliner.
The semiconductor sector has performed well so far in 2013,
rising 8.4 percent.
In other company news, shares of supermarket operator
Safeway Inc jumped 12.3 percent to $22 after the company
reported earnings that beat expectations.
In contrast, shares of VeriFone Systems Inc tumbled
nearly 40 percent to $19.28 after the credit-card swipe machine
maker forecast first- and second-quarter profits well below
Of the 427 companies in the S&P 500 that have reported
results so far, 69.3 percent have exceeded analysts'
expectations, compared with a 62 percent average since 1994 and
65 percent over the past four quarters, according to Thomson
Reuters data through Thursday morning.
Fourth-quarter earnings for S&P 500 companies are estimated
to have risen 5.9 percent, according to the data, above a 1.9
percent forecast at the start of the earnings season.
Berry Petroleum Co jumped 17.2 percent to $45.23
after oil and gas producer Linn Energy LLC said it
would buy the company in an all-stock deal valued at $4.3
billion, including debt. Linn Energy shares advanced 1.9 percent