US STOCKS-Wall St slips as biotech, momentum stocks lead decline

Thu Apr 3, 2014 2:32pm EDT

* Biotech, momentum stocks lead Nasdaq down 1 pct

* Wider U.S. trade deficit to weigh on first-quarter GDP

* Dow off 0.2 pct; S&P 500 off 0.2 pct; Nasdaq down 1.1 pct (Updates to afternoon)

By Angela Moon

NEW YORK, April 3 (Reuters) - U.S. stocks fell on Thursday afternoon, led by a sharp drop in biotech and momentum stocks, including Facebook, Tesla and Netflix.

The Nasdaq fell 1.1 percent as investors sold some of the market's biggest outperformers, mostly in the Internet and biotech space, to take profits from recent gains.

Investors were also reluctant to make big bets ahead of Friday's nonfarm payrolls report, when they will be looking for evidence that recent weather-related weakness in the economy has passed. In the latest week, U.S. jobless claims rose more than expected, the Labor Department said on Thursday, but the underlying trend still pointed to some strength in the job market.

"Momentum names are usually the ones that take the quickest hit when investors get anxious or worried, in this case, a bit of hesitancy ahead of tomorrow's payrolls," said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research in Austin, Texas.

The Global X Social Media ETF, which includes Facebook Inc, LinkedIn Corp and Groupon Inc , dropped 3.1 percent. The Nasdaq biotechnology index slid 3 percent.

The Dow Jones industrial average fell 26.40 points or 0.16 percent, to 16,546.60. The S&P 500 slipped 4.48 points or 0.24 percent, to 1,886.42. The Nasdaq Composite dropped 45.172 points or 1.06 percent, to 4,231.284.

Both the Dow and the S&P 500 hit intraday record highs during the morning, with the Dow climbing to 16,604.15, above its record close set on Dec. 31. The S&P 500 rose as high as 1,893.80.

Some analysts said the selloff in "momentum" stocks has yet to run its course, though this could benefit more value-oriented names. Buyers scooped up some of those companies' shares, which helped to limit the Dow's decline. Intel Corp gained 2.1 percent to $26.43. American Express Co added 0.5 percent to $90.87.

Among momentum stocks, the shares of Tesla Motors, the electric car maker, fell 2.4 percent to $224.90 and the shares of Netflix Inc, the online movie rental company, lost 2.6 percent to stand at $353.49.

The options market also focused on momentum stocks, with Tesla Motors remaining a favorite with the speculative crowd for a second day. The total option volume by afternoon was running at about a 30 percent mark-up to what's typically seen.

Shares of Barnes & Noble Inc plunged 14.7 percent to $18.87 after Liberty Media Corp said it has sold almost all of its stake in the company, ending a nearly three-year bet that the struggling retailer would emerge as a dominant seller of e-books.

The S&P 500 now consists of 501 stocks, with the index including both Google Inc's Class A and Class C shares after the company's special dividend. Google's Class A shares rose 0.5 percent to $570.88 while its Class C shares gained 0.4 percent to $569.18.

On the economic front, the U.S. trade deficit unexpectedly widened in February to $42.3 billion as exports hit a five-month low, suggesting that first-quarter growth could be much weaker than initially expected.

A bright spot came from the services sector, where growth accelerated in March after being hampered by unusually cold weather, according to the Institute for Supply Management's services-sector index.

In the biopharmaceutical sector, Gilead Sciences Inc said late Wednesday that a trial of its hepatitis C drug sofosbuvir, sold under the brand name Sovaldi in the United States, showed the drug was safe and effective in treating Japanese patients infected with a common form of the virus. However, its stock slipped 0.7 percent to $73.44.

Vivus Inc shares tumbled 7.3 percent to $5.73 after Piper Jaffray cut its rating on the pharmaceutical company's stock to "underweight" from "neutral." (Editing by Nick Zieminski and Jan Paschal)