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The markets skidded deep into negative territory Wednesday amid worries about the fiscal cliff and rising tensions in the Middle East. The Nasdaq ended the day in correction territory, while the Dow closed at the lowest level since June.
The Dow Jones Industrial Average fell 185 points, or 1.5%, to 12571, the S&P 500 dropped 19 points, or 1.4%, to 1355 and the Nasdaq Composite slumped 37.1 points, or 1.3%, to 2847.
The markets made a fairly swift turnaround after the positive open. Every S&P 500 sector ended to the downside. Industrials, such as Boeing (BA), took a particularly heavy thrashing. Materials, like Potash (POT), and financials, such as Bank of America (BAC), tumbled as well.
The Nasdaq slid into correction territory, falling 11% from an intraday high of 3196 on September 21. The VIX, seen as Wall Street's fear gauge, surged some 7.6%.
Still, there were a handful of bright spots. Cisco (CSCO) shares zoomed close to 5% higher after the networking giant reported fiscal first quarter profits and revenues that beat Wall Street's expectations.
Middle East Tension Heats Up
News that Israel fired several rockets into Gaza, killing a top Hamas military commander also came as a concern for market participants. In particular, market participants worried about the prospects of a new armed conflict in the highly-volatile region that also produces a large swath of the world's oil.
Indeed, oil prices got a big boost from the rising tension in the Middle East. The benchmark oil contract rallied 94 cents, or 1.1%, to $86.32 a barrel. Wholesale New York Harbor gasoline climbed 0.95% to $2.679 a gallon. Gold gained $5.30, or 0.31%, to $1,730 a troy ounce.
A Full Economic Docket
Market participants had no lack of economic news to parse through.
Members of the Federal Reserve’s policy-setting committee considered methods of tying interest rate moves to quantitative and qualitative economic targets as opposed to the current date-based forward guidance, minutes from the FOMC’s last meeting show. The FOMC also continued seeing the economy expanding at a “moderate pace” and noted downside risks caused by the looming fiscal cliff and strains in global financial markets.
The Commerce Department said U.S. retail sales fell 0.3% in October from September, more than the 0.2% decline expected, and the first drop since June. Excluding the auto segment, sales were unchanged from September. Economists were expecting a 0.2% gain. Hurricane Sandy had a negative and positive impact on sales, according to the Commerce Department.
A separate report at the same time from the Labor Department showed producer prices fell 0.2% in October from September, surprising economists who were expecting a 0.2% gain. Excluding the food and energy components, prices were down 0.2%, the biggest drop since October 2010. Economists were expecting a 0.1% gain.
Lastly, business inventories rose 0.7% in September from August, slightly better than the 0.5% gain expected. Inventories are generally seen as a forward-looking indicator of expected demand.
Fiscal Worries Persist
Market participants also paid close attention to President Barack Obama's first news conference since winning re-election. President Obama called on Congress to take action to get America's fiscal house in order. However, he demanded tax hikes on the country's highest earners as part of the deal -- a point of contention with Republicans. As such, worries have swelled about the country's ability to avert the fiscal cliff -- a painful set of tax increases and spending cuts that go into effect early next year.
The Euro Stoxx 50 dipped 0.81% to 2473, the English FTSE 100 sold off by 1.1% to 5722 and the German DAX slumped 0.94% to 7102.
In Asia, the Japanese Nikkei 225 ticked up by 0.04% to 8665 and the Chinese Hang Seng rallied 1.2% to 21442.