New York: US stocks fell on Tuesday with the NASDAQ declining more than 1 per cent after Yahoo Inc warned on its quarterly outlook, while the Thai Prime Minister declared a state of emergency in his country.
Yahoo's chief financial officer said the Web search engine company's third-quarter advertising growth would slow based on weakness in the automobile and financial sectors.
The warning also hurt shares of Yahoo rival Google Inc.
"Yahoo came out and said there is a drop in demand, which is scaring everybody," said Richard Williams, director of equity research at inter-dealer broker ICAP in New York.
Meanwhile, financial markets worldwide were rattled by news that Thai Prime Minister Thaksin Shinawatra declared a state of emergency shortly after Reuters witnesses saw tanks surrounding Government House in Bangkok.
Thaksin, who is in New York at a UN summit, ordered troops not to "move illegally".
The Dow Jones industrial average was down 63.07 points, or 0.55 per cent, at 11,491.93. The Standard & Poor's 500 Index was down 7.40 points, or 0.56 per cent, at 1,313.78. The NASDAQ Composite Index was down 28.56 points, or 1.28 per cent, at 2,207.19.
Yahoo's stock dropped 12 per cent to $26.52 on the NASDAQ. Yahoo's warning also weighed on shares of rival Google Inc., which fell 4.4 per cent to $396.44. Web auctioneer eBay Inc. was down 3.5 per cent to $25.90, also on the NASDAQ.
The Morgan Stanley Internet Index fell 3.1 per cent and was on track to record its biggest one-day drop since January.
Shares were little changed before the Yahoo warning and the news from Bangkok.
Investors showed little reaction to tamer-than-expected US inflation data, but fresh signs of weakness in housing stoked fears of an economic slowdown.
Producer prices rose less than expected in August, while core prices fell, reinforcing the view the Federal Reserve will hold interest rates steady again on Wednesday and is likely to refrain from further rate hikes this year.
The Commerce Department reported the pace of US home building fell more sharply than expected in August, renewing concerns consumers spending will slow.
Economically sensitive shares, such as big industrial producers, were some of the sharpest decliners on the Dow and S&P 500.
Caterpillar Inc. was down 1.5 per cent to $65.99, making it the biggest laggard on the Dow, while General Electric Co fell 0.6 per cent to $34.65, making it the top-weighted loser on the S&P.
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