* Malaysian airliner downed in Ukraine war zone
* Israeli PM orders ground offensive in Gaza -official
* Morgan Stanley profit more than doubles, beats estimates
* Dow off 0.9 pct; S&P 500 down 1.2 pct; Nasdaq off 1.4 pct
(Updates close with IBM, Google after the bell)
By Angela Moon
NEW YORK, July 17 U.S. stocks sank on Thursday,
with the S&P 500 posting its biggest one-day percentage drop
since April 10 on news that a Malaysian Airlines passenger jet
crashed near the Ukraine-Russia border.
Investors sold stocks in a move to avoid risk and poured
money into safe-haven investments like gold and U.S. government
bonds as the crash stoked concerns that the conflict in Ukraine
might widen after U.S. sanctions against Russia were announced
The United States said the Malaysian Airlines Boeing 777 was
"blown out of the sky," probably by a ground-launched missile.
The jet had 295 people aboard. The crash followed an increase in
tensions between Ukraine and Russia that has resulted in clashes
along the border, including the targeting of military aircraft.
Further pressuring the market, Israeli Prime Minister
Benjamin Netanyahu on Thursday instructed the military to begin
a ground offensive in Gaza, an official statement from his
office said. Reuters witnesses and Gaza residents reported heavy
artillery and naval shelling and helicopter fire along the Gaza
"I can't remember a time when there were more geopolitical
skirmishes going on, all of which are creating uncertainty,"
said Michael Mullaney, chief investment officer at Fiduciary
Trust Co in Boston.
"We were already ripe for a correction, but I'm putting
today into the 'noise' category for now, since we need to see
whether there is follow-through to this move."
The Dow Jones industrial average fell 161.39 points
or 0.94 percent, to end at 16,976.81. The S&P 500 lost
23.45 points or 1.18 percent, to 1,958.12. The Nasdaq Composite
dropped 62.52 points or 1.41 percent, to 4,363.45.
The CBOE Volatility Index, Wall Street's fear gauge,
surged 32.2 percent to 14.54, its highest level since April 15.
After the closing bell, shares of Google Inc rose
1.6 percent. The stock's jump followed news that Nikesh Arora,
the Internet search company's chief business officer - one of
Chief Executive Officer Larry Page's key lieutenants and the
company's main liaison to Wall Street - is leaving, the latest
high-ranking executive to depart. Arora's
surprise departure was announced as Google reported results that
beat investors' expectations.
Shares of International Business Machines Corp fell
1.3 percent in extended-hours trading after the company reported
higher-than-expected quarterly revenue and earnings per share.
The improvement in IBM's results occurred as the company
continued to shift to higher-end businesses such as big data,
cloud computing, and security and mobile services.
During the regular session, the NYSE Arca airline index
fell 2.6 percent. Shares of most major U.S. carriers
slid, with American Airlines Group Inc down 4.1 percent
at $41.70 and United Continental Holdings Inc down 3.5
percent at $43.35.
The Market Vectors Russia exchange-traded fund fell
7.2 percent on consolidated volume of 7.4 million shares.
The major U.S. stock indexes had opened slightly lower.
Equities held near the unchanged mark and the Dow briefly turned
positive, hitting an intraday record high at 17,151.56 in early
morning trading after solid earnings from companies such as
Morgan Stanley and UnitedHealth. Morgan Stanley's
stock slipped 0.6 percent to end at $32.30. Shares of
UnitedHealth Group Inc rose 1.6 percent to $85.11.
By late morning, though, stocks skidded to session lows
after news of the Malaysian plane crash.
Going against the day's sharp downtrend was Microsoft Corp
, which rose 1 percent to $44.53. The stock rallied
after Microsoft said it would cut up to 18,000 jobs, or about 14
percent of its workforce, resulting in pre-tax charges of $1.1
billion to $1.6 billion over the next four quarters.
About 6.63 billion shares traded on U.S. exchanges, above
the 5.48 billion average for the month to date, according to
data from BATS Global Markets.
(Reporting by Angela Moon; Editing by Jan Paschal)