Stocks end lower on Wall Street

The US stock market had its biggest decline in two weeks yesterday, led by a sell-off in blue-chip bank and energy stocks.

Wall Street had its biggest decline in a a fortnight (AP)
Wall Street had its biggest decline in a a fortnight (AP)

But house building firms rose after the government reported sales of new homes rose in May to the highest level in six years.

The late-afternoon selling came during a relatively quiet week for Wall Street. Traders said the selling might be tied to large mutual funds having to rebalance their portfolios ahead of the end of the quarter next week.

Other traders pointed to the ongoing violence in Iraq as a reason to pull out of the market ahead of the end of the quarter.

The Dow Jones industrial average fell 119.13 points, or 0.7%, to 16,818.13. The Standard & Poor's 500 index lost 12.63 points, or 0.6%, to 1,949.98 and the Nasdaq composite fell 18.32 points, or 0.4%, to 4,350.36.

The Dow fell more than the S&P 500 and Nasdaq as investors sold large, brand-name stocks. Exxon Mobil, Boeing, American Express and JPMorgan Chase all fell 1% or more.

The selling in blue-chip stocks marks a recent and notable change in trader behaviour. Stocks of large, diversified companies have been among the most popular with investors this year.

With the quarter end and mid-year approaching, it is not uncommon for investors to sell some of the best performing names to rebalance their portfolios.

Vertex Pharmaceuticals was a bright spot in the S&P 500. The drug company soared 26.92 dollars, or 40%, to 93.53 dollars after Vertex said its treatment for cystic fibrosis appeared to work better than a placebo in a late-stage study. Vertex plans to seek approval for the treatment in the US and Europe.

Traders say it is a positive sign to see investors heading back into biotechnology stocks. The sector was among the hardest hit in March and April. Even with yesterday's declines, the S&P 500 Biotechnology index rose 1.3%.

"That was a growth area that worried a lot of people, but the news out of Vertex is very bullish," said Ian Winer, director of stock trading at Wedbush Securities.

"The news has renewed a risk appetite in that space we have not seen in months."

Micron Technology jumped 1.24 dollars, or 4%, to 32.50 dollars, making it the second-biggest advancer in the S&P 500. The semiconductor maker reported better-than-expected earnings and raised its forecast for the next quarter. Dow component Intel, another major chipmaker, rose 27 cents, or 0.9%, to 30.50 dollars.

Housebuilder stocks also did well yesterday after the commerce department said sales of new homes jumped 18.6% in May to an annualised rate of 504,000. That is the highest level since May 2008.

International concerns remain an issue for investors as well. The United Nations said yesterday that more than 1,000 people, mostly civilians, have been killed in Iraq so far this month, the highest death toll since the US military withdrew from the country in December 2011.

In the United Arab Emirates, Dubai's stock market fell 6.7% yesterday and Abu Dhabi's fell 3.3%.