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Winning streak ends for stocks

NEW YORK - Stocks fell sharply on Wednesday, a day after the Standard & Poor's 500 index had its biggest gain of the year. The decline ended four days of gains after a stretch of tumultuous trading in recent weeks.

The Dow Jones industrial average fell 153 points, or 0.9 percent, to 16,461. The Nasdaq composite lost 36 points points, or 0.9 percent, to 4,383, while the S&P 500 also slipped.

"The market is still nervous," said John Manley, chief equity strategist at Wells Fargo Funds Management. "The extreme volatility of the last few weeks is on our minds."

Among the gainers for the day, Yahoo (YHOO) jumped $1.82, or 4.5 percent, to $42 after reporting encouraging third-quarter results late Tuesday. Yahoo got a windfall from the recent IPO of Alibaba, the giant Chinese online retailer that Yahoo owns a stake in. Revenue rose slightly from the previous year, a welcome change for a company that has been posting quarterly declines for most of the past five years.

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Broadcom rose 6 percent, the largest gain in the S&P 500, after the chipmaker reported earnings late Tuesday that topped Wall Street estimates. The stock rose $2.36 to $39.69. Interpublic Group also rose after reporting better-than-expected results.

Losers included Biogen Idec, whose shares dropped 4 percent despite a strong quarter. The drug company said a patient who took its newest multiple sclerosis drug suffered a brain inflammation and later died. The stock dropped $14.25 to $312.52.

With financial markets wobbling in recent weeks, a key question for investors is whether the stocks are fairly priced or overvalued. With about a fifth of S&P 500 companies out with earnings in past quarter and outlooks for future ones, stocks look reasonably priced compared to expectations for future earnings. The index is trading at 15.8 times expected earnings per share over the next 12 months, according to S&P Capital IQ, a research firm. That is not much lower -- meaning cheaper -- than the average of 16.4 since 2001.

But other measures, comparing stock prices to earnings over the past 10 years, for instance, suggest the market may be overvalued.

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