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Benchmarks suffered their biggest losses in months on Thursday following reports that a Malaysian Airlines passenger jet was shot down near Ukraine-Russian border. Moreover, escalating tension along the Gaza strip intensified fears and investors chose to park money in safe-haven assets. On the domestic front, investors had to witness discouraging corporate results and a weak home construction report. Housing starts fell to a nine-month low in June.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
 
The Dow Jones Industrial Average (DJI) declined 0.9% to close Thursday’s trading session at 16,976.81. It was the Dow’s biggest one-day percentage decline since May 15. The Standard & Poor 500 (S&P 500) dropped 1.2% to finish at 1,958.12. S&P 500 registered its biggest one-day drop since April 10. The tech-laden Nasdaq Composite Index closed at 4,363.45; declining 1.4%. The fear-gauge CBOE Volatility Index (VIX) surged 32.2% to settle at 14.54. Total volume for the day was roughly 6.63 billion shares, higher than last month’s average of 5.48 billion. Decliners outpaced advancing stocks on the NYSE. For 79% stocks that declined, 18% advanced.
 
Meanwhile, geopolitical tensions rattled investors on Thursday. A Malaysian Airlines passenger jet crashed near the Ukraine-Russia border. The Malaysian jet, MH 17, was en route to Kuala Lumpur from Amsterdam. The jet was carrying about 300 passengers. Using his Facebook page, a Ukrainian official reported that the Boeing 777 was shot down while flying at an altitude of 10,000 meters. Reportedly, the jet was shot down by a ground-launched missile. However, both Ukrainian government forces and pro-Russian separatists denied shooting down the plane.
 
This news dragged U.S. airline stocks down. Shares of American Airlines Group Inc. (AAL - Snapshot Report), Southwest Airlines Co. (LUV - Analyst Report), Delta Air Lines Inc. (DAL - Analyst Report), United Continental Holdings, Inc. (UAL - Analyst Report) and JetBlue Airways Corporation (JBLU - Analyst Report) dropped 4.1%, 1.9%, 3.4%, 3.5% and 2.2%, respectively.
 
Earlier, the National Security and Defense Council of Ukraine said a Russian plane shot down a Ukrainian SU-25 fighter jet. This incident intensified tension between Ukraine and Russia.
 
These developments came in after the U.S unveiled fresh sanctions against Russia late Wednesday. The new sanctions would restrict Russian companies such as oil giant Rosneft and the nation’s third-largest bank Gazprombank OAO from obtaining new financing from U.S. capital markets. The European Union also said that it would detail new sanctions against Russia by the end of this month.
 
Meanwhile, there were reports of unrest in Gaza. Residents of Gaza reported heavy artillery and naval shelling coupled with helicopter fire along the borders of Gaza. This attack took place after Israeli Prime Minister Benjamin Netanyahu instructed its military to begin a ground offensive in Gaza.
 
The geopolitical tensions compelled investors to take money out of equities and park them in safe-haven assets like U.S Treasury and gold.
 
Investors also had to digest a slew of disappointing corporate results and SanDisk Corp.’s (SNDK - Analyst Report) tepid third quarter revenue guidance.
 
Shares of SanDisk plunged 13.6% after the company forecasted third-quarter revenues would be between $1.675 billion and $1.725 billion, less than analysts’ estimate of $1.74 billion.
 
AutoNation Inc. (AN - Analyst Report) reported second quarter 2014 earnings per share of 83 cents, less than the Zacks Consensus Estimate of 87 cents. Mattel, Inc. (MAT - Analyst Report) posted second-quarter 2014 adjusted earnings of 3 cents per share that missed the Zacks Consensus Estimate of 19 cents per share. Earnings also declined 85.7% year over year. Shares of AutoNation and Mattel plunged 8.2% and 6.6%, respectively.
 
Yum! Brands, Inc.’s (YUM - Analyst Report) shares plummeted 6.7% after the company reported that year-over-year second quarter comparable store sales lagged expectations for two of the company's three components. Comparable store sales for Pizza Hut fell 3%, more than analysts’ estimate of 0.1%. On the other hand, Taco Bell comps gained 2% but fell short of analysts’ estimate of a rise by 3.6%.
 
The blue-chip index had briefly turned positive in early morning trade, touching an intraday record high of 17,151.76 after Morgan Stanley (MS - Analyst Report) and UnitedHealth Group Incorporated (UNH - Analyst Report) reported upbeat quarterly results.
 
Morgan Stanley reported earnings per share for the second quarter 2014 at 94 cents, more than the Zacks Consensus Estimate of 55 cents. UnitedHealth posted second-quarter 2014 operating earnings of $1.42 per share, beating the Zacks Consensus Estimate of $1.25.
 
Markets were also affected by dismal housing data as both housing starts and building permits suffered larger-than-expected declines. The U.S. Census Bureau and the Department of Housing and Urban Development said building permits dropped 4.2% from May to a seasonally adjusted annual rate of 963,000 in June. Building permits were expected to come in at 1,042,000. Privately-owned housing starts declined 9.3% in June to a seasonally adjusted annual rate of 893,000, lagging the consensus estimate of 1,023,000.
 
The SPDR S&P Homebuilders (XHB) declined almost 2.0%, the biggest loser among the S&P 500 sectors. Key housing stocks from the sector such as DR Horton Inc. (DHI - Analyst Report), Toll Brothers Inc. (TOL), PulteGroup, Inc. (PHM), Lennar Corp. (LEN) and KB Home (KBH) decreased 3.9%, 2.9%, 2.4%, 3.4% and 2.9%, respectively.
 
However, economic reports on weekly jobless claims and manufacturing activity in the Philadelphia region turned out to be better-than-expected. The Labor Department said initial claims declined 3,000 to 302,000 in the week ending July 12. This claim for unemployment benefits was at the lowest level in nine weeks. The 4-week moving average decreased to 309,000 from the previous week’s revised average of 312,000. This is the lowest level for this average since June 2, 2007.
 
The Philadelphia Fed’s manufacturing index showed business activity was at its best since March 2011. According to the reports, regional manufacturing activity expanded to 23.9 in July from 17.8 in June, beating consensus estimate of a decline to 14.5. The regional federal-reserve-bank index measuring changes in business growth has now remained positive for five consecutive months.
 
All 10 sectors of the S&P 500 ended in the red. The Energy Select Sector SPDR (XLE) declined 1.6%, the second highest among the S&P 500 sectors. Key energy stocks such as Exxon Mobil Corporation (XOM), Chevron Corporation (CVX), Schlumberger Limited (SLB), Halliburton Company (HAL) and Transocean Ltd. (RIG) dropped 1.4%, 0.6%, 1.1%, 2.1% and 2.6%, respectively.

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