* S&P 500 breaches 50-day moving average, falls under 1,600
* All 10 S&P sectors lower, consumer staples weakest
* Analyst: sell-off may not be justified but could persist
* Indexes down: Dow 2.3 pct, S&P 2.5 pct, Nasdaq 2.3 pct
By Ryan Vlastelica
NEW YORK, June 20 (Reuters) - U.S. stocks fell more than 2
percent on Thursday, extending the previous day's sharp decline
as investors fretted over the Federal Reserve's plan to begin
reducing its stimulus later this year if the economy
The S&P 500 recorded its biggest daily decline since
November 11, 2011, on the year's heaviest day of trading. All 10
S&P sectors were sharply lower, with 94 percent of stocks traded
on the New York Stock Exchange down for the day and more than
four-fifths of Nasdaq-listed shares ending lower.
The Dow Jones industrial average dived 353.87 points,
or 2.34 percent, at 14,758.32. The Standard & Poor's 500 Index
was down 40.74 points, or 2.50 percent, at 1,588.19. The
Nasdaq Composite Index dropped 78.57 points, or 2.28
percent, at 3,364.64.
The Fed's program of bond-buying has fueled stock market
gains this year, sending indexes to a series of all-time highs.
A trend emerged of investors buying on market dips and limiting
David Joy, chief market strategist at Ameriprise Financial
in Boston, said it wasn't clear that pattern would continue.
"There's money leaving the market from people who were
convinced that the rally has been mostly attributable to the
Fed, and the rise on the 10-year yield is a concern since it
happened so quickly," he said. "It's too early to say whether
this represents a buying opportunity or if the weakness will
The S&P 500 index closed below its 50-day moving average for
only its second time this year. An extended break below that
level, a key technical measure of the recent trend in stocks,
could add to selling pressure. It also closed under 1,600 for
the first time since May 2.
About 9.29 billion shares changed hands on the New York
Stock Exchange, the Nasdaq and NYSE MKT, above the daily average
so far this year of about 6.36 billion shares.
Bernanke on Wednesday said the central bank's policy of
buying $85 billion in bonds per month could start to wind down
this year if the economy is strong enough and could finish in
"Remember that tapering would be a vote of confidence in the
market, which would be good news," said Joy, who helps oversee
$708 billion in assets. "And for the moment, the Fed is still
very accommodative, with things remaining data-dependent. Those
are signs that declines of this magnitude may not be justified."
Also adding to the market's concerns, China's interbank
funding costs surged as the government ignored market pressure
to inject funds into the market despite more evidence China's
economy is slowing. Chinese stocks dropped 2.8 percent.
Among the U.S. sectors hit hard on Thursday were
homebuilders, down 6.7 percent on concerns of higher
borrowing rates. Data on Thursday showed sales of existing U.S.
homes rose in May rose to a 3 1/2-year high.
Builder PulteGroup Inc fell 9.1 percent to $18.87 as
the biggest decliner on the S&P 500, followed by D.R. Horton Inc
, down 9 percent to $21.31.
The benchmark 10-year U.S. Treasury note fell
15/32, with the yield at 2.408 percent.
The S&P has fallen about 4 percent from its all-time closing
high on May 21 of 1,669.16. Other markets around the world have
also have fallen dramatically, with the MSCI's all-country world
markets index dropping 3.7 percent, its largest
single-day drop in 19 months.
Each of the 10 S&P industry sectors fell more than 1 percent
with consumer staples leading the losses with a 3
percent drop. Kroger fell 6.1 percent to $32.98 after the
company said its sales growth missed expectations in the first
Energy shares were also sharply weaker, dropping alongside a
2.9 percent slump in the price of crude oil.
Walt Disney shares fell 3.7 percent to $61.98 after
Goldman Sachs removed the stock from its "conviction buy" list.
Shares of Ebix Inc lost 44 percent to $11 a day
after the insurance software provider said that it and an
affiliate of Goldman Sachs would cancel their planned
Oracle Corp fell in extended trading after the
company reported an increase in new software sales that was at
the low end of its own forecasts.
On the upside, GameStop Corp jumped 6.3 percent to
$40.94 a day after Microsoft Corp said users of its
forthcoming Xbox One game console will be able to lend or sell
used disc-based games, a plus for GameStop's used games
Jabil Circuit Inc rose 1.5 percent to $20.12 a day
after announcing an unspecified number of job cuts as part of a