US STOCKS-Wall St skids on cloudy technical outlook

                                

  * Moody's downgrades Spain's sovereign debt rating
  * China trade deficit, initial U.S. jobless disappoint
  * Crude pares losses on report of Saudi violence
  * Dow off 1.7 pct, S&P off 1.7 pct, Nasdaq off 1.7 pct
 * For up-to-the-minute market news see [STXNEWS/US]
 (Updates to late afternoon)
                                
 By Edward Krudy
                                
 NEW YORK, March 10 (Reuters) - Fears about the economy and
unrest in the Middle East sent indexes skidding below key
technical levels on Thursday as the near-term outlook for
stocks grew cloudy.
                                
 All three major indexes fell below their 50-day moving
averages, a medium-term momentum indicator that many traders
see as a sign of a market inflection point.
                                
 Volume was on track for an above-average day while
declining stocks outstripped advancers by six to one on NYSE.
                                
 A ratings agency's downgrade of Spain, an unexpected swing
to a trade deficit in China and U.S. jobless data were the
initial catalysts for the selloff.
                                
 Selling was aggravated in the early afternoon after
reports that authorities in Saudi Arabia had opened fire on
demonstrators, which caused oil prices to pare losses.
                                
 Energy stocks were the biggest drag after recent gains.
The S&P's energy sector <.GSPE> lost 3 percent, with Exxon
Mobil <XOM.N> and Chevron Corp <CVX.N> each down 3 percent.
                                
 Peter Andersen, a portfolio manager at Congress Asset
Management in Boston, said the confluence of events was
hurting investor sentiment.
                                
 "They're adding all those things up and coming up with a
fairly negative scenario," he said.
                                
 The Dow Jones industrial average <.DJI> fell 212.21
points, or 1.74 percent, to 12,000.88. The Standard & Poor's
500 Index <.SPX> lost 22.41 points, or 1.70 percent, to
1,297.61. The Nasdaq Composite Index <.IXIC> dropped 47.38
points, or 1.72 percent, to 2,704.34.
                                
 The CBOE Volatility Index or VIX <.VIX>, Wall Street's
favorite gauge of investor fear, was up 5.3 percent at 21.30
in late afternoon trading.
                                
 Analysts have been calling for a correction in the market
after its big run up since early September. The S&P 500 is up
roughly 25 percent since then.
                                
 However, many investors have been using dips to increase
exposure to stocks in the belief that longer-term economic
fundamentals point to a slow steady recovery.
                                
 "I do think it is a buying opportunity," said Andersen,
who said he had been buying stocks over the course of the day.
"I'm adding to names that I've always liked."
                                
 The benchmark S&P 500 index fell below its 50-day moving
average, an indication of medium-term momentum for the market,
for the first time since November.
                                
 An index of semiconductors <.SOX>, among the market's
weaker areas this week, lost 2.1 percent.
                                
 Brent crude oil futures pared losses after reports from
Saudi Arabia said police had fired on protesters. Brent
slipped 51 cents to settle at $115.43 per barrel.
                                
 "Two areas hit this week are energy and semis, and these
are two of the best areas so far this year," said Eric
Marshall, director of Research, Hodges Capital Management,
Dallas, Texas.
                                
 The energy index is up 9 percent since the start of the
year, while the semi index is up 3.7 percent. The S&P 500 is
up 3.4 percent since the end of December.
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 Graphic-S&P 500 and sector trading ranges:
                                
http://r.reuters.com/tez38r
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 Copper ended down for a second straight session after
surprisingly soft Chinese trade data underscored global growth
concerns. The S&P materials sector index<.GSPM> fell 1.7
percent.
                                
 U.S. government data showed initial claims for state
unemployment benefits increased 26,000 to a seasonally
adjusted 397,000 and the U.S. trade deficit widened much more
than expected in January to $46.3 billion. For details, see
[ID:nN10117103]
                                
 Moody's one-notch downgrade of Spain, based on the costs
of restructuring its banks, came with a warning that further
cuts were possible. The agency downgraded Greece's debt
earlier this week. [ID:nLDE7290IP]
                                
 China swung to an unexpected trade deficit in February of
$7.3 billion, its largest in seven years, but economists said
the drop was likely temporary. [ID:nTOE72903F]
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 Graphic: S&P falling below technical levels:
                                
http://r.reuters.com/kuz48r
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 (Reporting by Edward Krudy; Additional reporting by Caroline
Valetkevitch, Charles Mikolajczak and Doris Frankel; Editing
by Jan Paschal)