Wall Street flounders on BOJ fears as Facebook, M&A boosts wane

By Laila Kearney

(Reuters) - U.S. stocks slid on Thursday afternoon as a midday recovery led by Facebook's earnings coupled with news of promising M&A deals faded and the Bank of Japan's surprising call to cap monetary stimulus continued to rattle investors.

The benchmark S&P 500 lost 21.02 points, or 1 percent, to 2,074.13, the Dow Jones industrial average was down 224.15 points, or 1.24 percent, to 17,817.4, and the Nasdaq Composite dropped 57.04 points, or 1.17 percent, to 4,806.11.

All 10 major S&P 500 sectors were lower, with information technology's <.SPCOMT> 1.6 percent fall leading the decliners.

"This really personifies how important central bank policy is on the market," said Jack Ablin, chief investment officer at BMO Private Bank.

Stocks had dipped early in the day on the BOJ's decision to hold steady in the face of soft global demand and a rise in the yen, jarring markets particularly after media reports that the central bank would likely go deeper into negative interest rates.

The decision came a day after the Federal Reserve decided to hold steady on rates and eased fears that it would signal a rise in June.

Stocks began a modest recovery midday on Facebook's stellar earnings, which pushed the company's stock to record high levels, and a flurry of dealmaking news.

St. Jude Medical soared 26.3 percent to $78.22 after Abbott Laboratories said it agreed to buy the medical device maker for $25 billion. Abbott was down 7 percent at $40.70.

DreamWorks Animation was up 24.2 percent at $39.98, after Comcast said it will buy the company for $3.8 billion. Comcast was up 0.8 percent at $61.86.

But the stocks quickly began to sink again, with Apple leading the way.

Shares of Apple, already suffering from disappointing earnings, took another hit after billionaire investor Carl Icahn said he no longer has a position. Apple was last down 3 percent at $94.87.

The U.S. stock market is on its second-longest bull run ever. The S&P 500, which is nearing its record high, has rallied 15 percent since February, helped by a recovery in oil prices and an accommodating Fed.

The U.S. dollar index has fallen about 4.7 percent since the start of the year against a basket of major currencies, while oil prices have jumped 75 percent in three months. [O/R]

Data showed U.S. economic growth braked sharply to its slowest pace in two years as consumer spending softened. Gross domestic product rose 0.5 percent, below the 0.7 percent increase expected by economists polled by Reuters.

Declining issues outnumbered advancing ones on the NYSE by 1,922 to 1,012, for a 1.90-to-1 ratio on the downside; on the Nasdaq, 1,788 issues fell and 1,007 advanced for a 1.78-to-1 ratio favoring decliners.

The S&P 500 posted 19 new 52-week highs and 1 new lows; the Nasdaq recorded 57 new highs and 13 new lows.

(Additional reporting by Tanya Agrawal; Editing by Meredith Mazzilli)