Nasdaq drops 3 percent, worst day since November 2011

Credit: Reuters/Brendan McDermid

1 of 4. Traders work on the floor of the New York Stock Exchange April 9, 2014.

The Nasdaq biotechnology index .NBI shed 5.6 percent, its biggest one-day drop since August 2011, adding to recent losses since a big drop in Gilead more than two weeks ago triggered a wider selloff for biotechs and other recent big gainers. The Nasdaq biotech index has fallen 19.3 percent from its all-time high of 2,872.29 on February 25.

The S&P 500 also posted its biggest percentage loss since February 3, while the Nasdaq has dropped 7 percent from its closing high for the year, set on March 5. All stocks in the Nasdaq 100 index .NDX posted a loss, with the exception of CH Robinson Worldwide (CHRW.O), which ended up 1.6 percent at $53.80.

The selling also hit the shares of three companies in their first day of public trading after their initial public offerings were priced on Wednesday night. All three IPOs ended lower.

'This is a pretty dramatic selloff, but it's not entirely unexpected,' said Randy Frederick, managing director of active trading and derivatives for Charles Schwab in Austin, Texas.

'Momentum names have been driving this market higher. A lot of these names have been trading at stratospheric valuations, and on long-term outlooks, that may or may not materialize. The question is, 'At what point do they get too expensive?' Right now, I think they're looking a little expensive.'

There's a good chance that the selling could spread to areas beyond the momentum names, Frederick said.

Alexion Pharma (ALXN.O) was the S&P 500's biggest decliner, off 7.5 percent at $144.19, followed by Gilead Sciences, down 7.3 percent at $65.48, and TripAdvisor, down 7 percent at $81.90.

The move was a sharp reversal from the previous day, when shares rallied after minutes from the latest Federal Reserve policymakers' meeting showed members were more keen to keep rates low than previously expected.

The Dow Jones industrial average .DJI plummeted 266.96 points or 1.62 percent, to end at 16,170.22. The S&P 500 .SPX lost 39.09 points or 2.09 percent, to close at 1,833.09. The Nasdaq Composite .IXIC dropped 129.794 points or 3.1 percent, to 4,054.106.

The S&P 500 closed below its 50-day moving average for the first time since February 10, while the CBOE Volatility index .VIX, Wall Street's measure of investor anxiety, spiked 14.98 percent to end at 15.89, still at historically low levels.

The stock of bailed-out auto lender Ally Financial Inc (ALLY.N) fell 4.1 percent to close at $23.98 in its market debut.

Two biotech companies - Cerulean Pharma Inc (CERU.O) and Adamas Pharmaceuticals Inc (ADMS.O) - also slid in their trading debuts. Cerulean fell 2.1 percent to close at $6.85, while Adamas lost 12.4 percent to end at $14.01.

Among Internet-related tech shares, which were among last year's biggest advancers, Facebook Inc (FB.O) fell 5.2 percent to end at $59.16, while Netflix Inc (NFLX.O) sank 5.2 percent to close at $334.73.

'You've basically more than erased the bounce of the last two days, so I would imagine any bounce from these levels is probably going to be met with supply because the market is on very tenuous legs right now,' said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

Volume was high, with 7.5 billion shares changing hands on U.S. exchanges, well above the 6.8 billion average so far this month, according to data from BATS Global Markets.

Decliners outnumbered advancers on the New York Stock Exchange by a ratio of 3.6 to 1. On the Nasdaq, about 6.6 stocks fell for every one that rose.

(Editing by Jan Paschal)

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