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* U.S. services sector contracts for first time since 2016
* Technology leads sector declines
* Indexes down: Dow 0.8%, S&P 500 1.1%, Nasdaq 1.8%
(Updates to close)
By Caroline Valetkevitch
NEW YORK, Feb 21 (Reuters) - U.S. stocks sold off and the
Nasdaq had its worst daily percentage decline in about three
weeks on Friday as a spike in new coronavirus cases and data
showing a stall in U.S. business activity in February fueled
investors' fears about economic growth.
Declines were led by the technology sector for a second
straight session. Tech-related heavyweights Microsoft Corp
MSFT.O , Amazon.com Inc AMZN.O and Apple Inc AAPL.O were
the biggest drags on the S&P 500.
The S&P technology index .SPLRCT dropped 2.3%. Chipmakers,
which have strong ties to China, also fell sharply. The
Philadelphia Semiconductor index .SOX ended down 3%.
China reported a jump in new cases on Friday, while South
Korea became the latest hot spot, with 100 new cases, and more
than 80 people tested positive for the virus in Japan.
"It's creating a wild card" for companies and investors,
said Peter Tuz, president of Chase Investment Counsel in
Charlottesville, Virginia. "Going into a weekend not so long
after the stock market was hitting highs, people are taking some
money off the table."
Apple earlier this week issued a sales warning, citing the
impact of the virus outbreak.
The worries pushed up Wall Street's fear gauge, the CBOE
volatility index .VIX , and caused investors to seek safe-haven
assets. The VIX hit its highest closing level since Feb. 3.
Gold and bond prices rose and some defensive equity sectors,
including staples .SPLRCS , ended the day higher.
The IHS Markit Purchasing Managers' index of services sector
activity dropped to its lowest level since October 2013,
signaling a contraction for the first time since 2016. The
manufacturing sector also clocked its lowest reading since
August. The Dow Jones Industrial Average .DJI fell 227.57 points,
or 0.78%, to 28,992.41, the S&P 500 .SPX lost 35.48 points, or
1.05%, to 3,337.75 and the Nasdaq Composite .IXIC dropped
174.38 points, or 1.79%, to 9,576.59.
For the week, the Dow was down 1.4% and the S&P 500 lost
1.3%. The Nasdaq shed 1.6%, its biggest weekly percentage
decline in three weeks.
Hopes of monetary easing by major central banks had
propelled the S&P 500 and the Nasdaq to all-time highs earlier
this week.
Also on Friday, Dropbox Inc DBX.O jumped 20% after it
raised its outlook for operating margin, and Deere & Co DE.N
rose 7% after an unexpected rise in first-quarter profit.
Sprint Corp S.N climbed 6% as it announced new merger
terms with T-Mobile US TMUS.O showing a reduction in the stake
of major Sprint shareholder SoftBank. T-Mobile shares dipped
0.9%. Declining issues outnumbered advancing ones on the NYSE by a
2.17-to-1 ratio; on Nasdaq, a 2.25-to-1 ratio favored decliners.
The S&P 500 posted 30 new 52-week highs and 8 new lows; the
Nasdaq Composite recorded 74 new highs and 59 new lows.
Volume on U.S. exchanges was 8.28 billion shares, compared
with the 7.66 billion average for the full session over the last
20 trading days.