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Stocks drop on blue-chip, energy sell-off

Specialist Thomas Facchine, right, calls out prices during

Specialist Thomas Facchine, right, calls out prices during the IPO of Eclipse Resources Corp. on the floor of the New York Stock Exchange, Friday, June 20, 2014. Photo Credit: AP / Richard Drew

The stock market had its biggest decline in two weeks Tuesday, led by a sell-off in blue-chip bank and energy stocks. Home builders rose after the government reported sales of new homes rose in May to the highest level in six years.

At the close on Wall Street, the Dow Jones industrial average fell 119.13 points, or 0.7 percent, to 16,818.1. The Standard & Poor's 500 index lost 12.6 points, or more than 0.6 percent, to 1,949.98, and the Nasdaq composite fell 18.3 points, or more than 0.4 percent, to 4,350.4.

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 percent or more.

BLUE CHIP SELL-OFF. The selling in blue-chip stocks marks a recent and notable change in trader behavior. Stocks of large, diversified companies have been among the most popular with investors this year. With the quarter end, and midyear approaching, it's not uncommon for investors to sell some of the best performing names to rebalance their portfolios.

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 portfolios before 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 before the end of the quarter.

BRIGHT SPOT ON S&P. Vertex Pharmaceuticals was a bright spot in the S&P 500. The Boston-based drug company soared $26.92, or 40 percent, to $93.53 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 United States and Europe.

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

"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."

BIOTECH LIGHTS UP. Micron Technology jumped $1.24, or 4 percent, to $32.50, 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 percent, to $30.50.

HOME-BUILDER STOCKS. Home-builder stocks also did well Tuesday after the Commerce Department said sales of new homes jumped 18.6 percent in May to an annualized rate of 504,000. That's the highest level since May 2008.

TURMOIL IN IRAQ. International concerns remain an issue for investors as well. The United Nations said Tuesday that more than 1,000 people, mostly civilians, have been killed in Iraq so far this month, the highest death toll since the U.S. military withdrew from the country in December 2011. In the United Arab Emirates, Dubai's stock market fell 6.7 percent Tuesday and Abu Dhabi's fell 3.3 percent.

SAFE HAVEN IN BONDS. Bond prices rose as investors sought safety amid the stock market declines. The yield on the 10-year Treasury note fell to 2.58 percent from 2.63 on Monday.

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