Wall Street falls, led by drop in Apple

By Caroline Valetkevitch

NEW YORK (Reuters) - U.S. stocks dropped 1 percent in a broad decline on Wednesday, led by a drop in Apple shares on worries about slowing demand, while energy and other commodity-related shares sank for a second day this week.

Apple Inc dropped 5.4 percent to $403.26 and briefly fell below $400 for the first time since December 2011. A key supplier, chipmaker Cirrus Logic , gave a disappointing revenue forecast, fueling worries about weakening demand for the iPhone and iPad.

The CBOE Volatility index, a measure of investor anxiety, spiked 26 percent, though action on the VIX was also influenced by the expiration of April futures contracts.

A drop in gold triggered a stock sell-off Monday that drove the S&P 500 down more than 2 percent in its biggest daily percentage fall since November 7. Stocks bounced back on Tuesday, but analysts said stocks could fall further given the strong gains since the start of the year.

"After Monday's gold sell-off spooked U.S. equities, it seems as though the dip buyers are a bit less aggressive, allowing the market to fall a bit more," said Gordon Charlop, a managing director at Rosenblatt Securities in New York.

"This could also be indicative of a muted risk tolerance and perhaps mark the beginning of a long-awaited equity pullback."

Besides technology, energy and materials sectors were among the worst performers as oil and copper prices fell. The S&P 500 energy companies was down 2.1 percent and shares of Chevron slid 1.8 percent to $114.87 and led declines on the Dow.

Financial stocks also fell after Bank of America Corp posted revenue and profits that were below Wall Street expectations. Shares of the Dow component slumped 6 percent to $11.54.

The Dow Jones industrial average was down 121.22 points, or 0.82 percent, at 14,635.56. The Standard & Poor's 500 Index was down 21.22 points, or 1.35 percent, at 1,553.35. The Nasdaq Composite Index was down 57.22 points, or 1.75 percent, at 3,207.40.

As Apple shares moved lower, the stock's implied volatility, which measures perceived risk of future stock movement, shot up, according to Ophir Gottlieb, managing director of options analytics firm Livevol.

Among other tech decliners, Texas Instruments shed 3.8 percent to $34.37.

Intel Corp added 0.5 percent to $21.01 after the chipmaker said its current-quarter revenue would decline as much as 8 percent. The world's largest chipmaker also trimmed its 2013 capital spending plans.

Adding to uncertainty in the market, authorities said a letter sent to President Barack Obama and intercepted at a mail screening facility contained the deadly poison ricin, according to preliminary testing.

"The ongoing sequence of these terrorist incidents ... doesn't create an environment for good investor psychology," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

(Additional reporting by Doris Frankel; Editing by Kenneth Barry and Nick Zieminski)