Wall Street slips on Fed worries, global growth

U.S. stocks retreated in choppy trading on Wednesday amid worries over the Federal Reserve's possible tapering of its asset purchases as well as lackluster global growth prospects.

The blue-chip Dow Jones Industrial Average sank 106.59 points, or 0.69 percent, to 15,302.80 points. The broader S&P 500 lost 11. 70 points, or 0.70 percent, to 1,648.36 points. The tech-rich Nasdaq Composite Index shed 21.37 points, or 0.61 percent, to 3, 467.52 points.

The main stock indices opened sharply lower after market rally sent the Dow to a record closing high on Tuesday, buoyed by upbeat economic data from the U.S. and a general rise in global markets.

However, fears that the Fed is likely to scale back its quantitative easing measures intensified as Tuesday's data showed the U.S. consumer confidence hit a five-year high and the annual growth of U.S. home prices in March touched a seven-year high.

Market sentiment was also dampened by a downgrade of global economic growth. The Organization for Economic Cooperation and Development (OECD) on Wednesday revised down global economic growth to 3.1 percent from 3.4 percent in 2013, and 4 percent from 4.2 percent in 2014.

In its latest bi-annual outlook, the OECD said "exit from unconventional monetary policy, when needed, may be difficult to manage and less smooth than desirable, possibly leading to sharp rises in bond yields and serious negative consequences for growth in a number of advanced and emerging economies."

Separately, the International Monetary Fund on Wednesday cut its outlook for China this year to 7.75 percent from 8 percent on concerns of weak and uncertain global conditions.

On the economic front, the U.S. mortgage application activity dropped for the third straight week as key interest rates reached their highest levels in a year, the Mortgage Bankers Association ( MBA) reported Wednesday in its Weekly Applications Survey for the week ending May 24.

"Rates rose in response to stronger economic data and an increasing chance that the Federal Reserve may soon begin to taper their asset purchases," said MBA Vice President of Research and Economics Mike Fratantoni.

With no important economic data out Wednesday, investors will be keeping an eye on the weekly initial jobless claims data and the second estimate for the first-quarter gross domestic product ( GDP) of the United States on Thursday.

The CBOE Volatility Index, regarded as the fear gauge of Wall Street, advanced 2.42 percent to 14.83.

In corporate news, Smithfield Foods, the world's largest pork producer and processor, announced Wednesday that it has agreed with China's Shuanghui International Holdings Limited for a buyout deal that valued Smithfield at approximately 7.1 billion U.S. dollars, including the assumption of its net debt. Shares of Smithfield surged 28.42 percent to 33.35 dollars a share.

In other markets, speculations of the Fed's possible tapering also weighed down oil prices and the U.S. dollar.

Light, sweet crude for July delivery lost 1.88 dollars, or 1.98 percent, to settle at 93.13 dollars a barrel on the New York Mercantile Exchange. Brent for July delivery went down 1.8 dollars, or 1.72 percent, to close at 102.43 dollars a barrel.

The current oil price is suitable for producers and consumers, Saudi Arabia's Petroleum and Mineral Resources Minister Ali al- Naimi said Wednesday. The kingdom is the world's biggest crude exporter.

Meanwhile, the greenback slipped sharply against Japanese yen and Swiss Franc as demand for safe-haven assets increased while equity market retreated. But analysts believe the dollar's pullback will be limited as the U.S. economy is expected to continue improving.

According to the OECD's outlook, U.S. GDP will grow 1.9 percent this year, and Japan's economy will expand 1.6 percent this year. But eurozone's GDP will contract 0.6 percent in 2013.

In late New York trading, the euro rose to 1.2935 dollars from 1.2875 of the previous session and the British pound increased to 1.5124 dollars from 1.5063. The Australian dollar slipped to 0. 9635 dollars from 0.9640.

The dollar bought 101.15 Japanese yen, lower than 102.08 yen of the previous session. It edged down to 0.9633 Swiss francs from 0. 9733 and dropped to 1.0356 Canadian dollars from 1.0385 of the previous trading day.