US STOCKS-Wall St drops 2 percent after Fed in broad decline
* S&P 500 breaches 50-day moving average, falls under 1,600
* All 10 S&P sectors lower, consumer staples weakest
* Analyst: selloff may not be justified, but could persist
* Indexes down: Dow 1.9 pct, S&P 2.2 pct, Nasdaq 2.1 pct
By Ryan Vlastelica
NEW YORK, June 20 (Reuters) - U.S. stocks fell more than 2 percent in a broad selloff on Thursday, extending the previous day's sharp decline as investors continued to fret over the Federal Reserve's plan to begin winding down its stimulus program later this year.
The S&P 500 was on track for its worst daily decline since April 15, and its worst two-day decline in seven months. All 10 S&P sectors were sharply lower, with more than 90 percent of stocks traded on the New York Stock Exchange down on the day.
The index fell below its 50-day moving average, a key technical measure of the recent trend in stocks. It closed below that level on only one day this year, in mid-April, and a break below it could add to selling pressure. It was also on track for its first close under 1,600 since May 2.
The Fed's program has fueled market gains this year, sending indexes repeatedly to all-time highs and contributing to a trend where investors bought on dips, limiting equity declines. David Joy, chief market strategist at Ameriprise Financial in Boston, said it wasn't clear that trend would persist.
"There's money leaving the market from people who were convinced that the rally has been mostly attributable to the Fed, and the rise on the 10-year yield is a concern since it happened so quickly," he said. "It's too early to say whether this represents a buying opportunity or if the weakness will continue."
Bernanke on Wednesday said the central bank's policy of buying $85 billion in bonds per month could start to ebb this year if the economy is strong enough, with it possibly ending next year.
"Remember that tapering would be a vote of confidence in the market, which would be good news," said Joy, who helps oversee $708 billion in assets. "And for the moment, the Fed is still very accommodative, with things remaining data-dependent. Those are signs that declines of this magnitude may not be justified."
Among the sectors getting hit hard were homebuilders, down 5 percent on concerns that higher borrowing rates will reduce housing activity. That came even though sales of existing U.S. homes rose in May to a three-and-a-half-year high.
Builder PulteGroup Inc fell 11 percent to $18.41 as the biggest decliner on the S&P 500. Volume was heavy at about 150 percent of its average volume over the last 30 days.
The Dow Jones industrial average was down 293.06 points, or 1.94 percent, at 14,819.13. The Standard & Poor's 500 Index was down 35.15 points, or 2.16 percent, at 1,593.78. The Nasdaq Composite Index was down 71.48 points, or 2.08 percent, at 3,371.72.
The benchmark 10-year U.S. Treasury note was down 18/32, with the yield at 2.4209 percent.
The S&P now sits about 4 percent below its all-time closing high on May 21 of 1,669.16. Other markets around the world have been hurt much more, with the MSCI's all-country world markets index dropping 3.1 percent, its largest single-day drop in 19 months. That index has lost 6.8 percent from the May 21 close.
Each of the 10 S&P industry sectors fell more than 1 percent with consumer staples leading the losses with a 2 percent drop. Kroger fell 5.1 percent after the company said its sales growth missed expectations in the first quarter.
Energy shares were also sharply weaker, dropping alongside a 2.9 percent slump in the price of crude oil.
Walt Disney shares fell 2.7 percent to $62.59 after Goldman Sachs removed the stock from its "conviction buy" list.
Shares of Ebix Inc lost 42.8 percent to $11.27, a day after the insurance software provider said that it and an affiliate of Goldman Sachs would cancel their planned merger after U.S regulators started an investigation into allegations of misconduct at Ebix.
On the upside, GameStop Corp jumped 6.6 percent to $41.09 a day after Microsoft Corp said users of its forthcoming Xbox One game console will be able to lend or sell used disc-based games, a plus for GameStop's used games business.
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