Today: Wall Street has one of its worst days of the year as Facebook challenges Twitter's Vine offering by adding 15-second video capability to Instagram. Also: Oracle's (ORCL) software sales disappoint in quarterly earnings.

The lead: Wall Street tanks in continuing fallout from Fed announcement

Wall Street indexes had some of their largest one-day declines of 2013 on Thursday, as the Federal Reserve chief Ben Bernanke's announcement that bond purchases could soon start to taper continued to roil stocks.

The Dow Jones industrial average had its worst day since a large drop in the wake of the 2012 elections, losing 353 points, or 2.3 percent, to fall lower than 15,000 and wipe out almost all the gains experienced in the past two months. The Standard & Poor's 500 fell sharper than it had since November 2011, losing 2.5 percent and falling lower than 1,600; the tech-heavy Nasdaq joined in with a 2.3 percent decline, while the VIX -- considered a gauge for fear in the market -- hit its highest level of the year.

Experts said Thursday's massive drop -- which coincided with heavy volume -- was a result of traders who did not believe Bernanke would announce the possibility of the end of qualitative easing cashing out some of their gains.

"There's money leaving the market from people who were convinced that the rally has been mostly attributable to the Fed," David Joy, chief market strategist at Ameriprise Financial, told Reuters.

Meanwhile, nobody seemed anxious to buy, unlike earlier dips in the market this year, causing supply to spike while demand dropped.

"It's been so violent that it puts people on the sidelines," James Paulsen, chief investment strategist at Wells Capital Management, told Bloomberg News. "The buyers are saying 'I'm going to wait and see.' They're not running to the exits but they're also not willing to catch a falling knife."

As investors pulled out of stocks, the yield on government bonds soared -- the yield on the 10-year treasury note hit its highest level in nearly two years, which could signal a rise in mortgage rates.

The rapid decline of the markets the past two days is frustrating for those who see the Fed's announcement as proof that the U.S. economy is improving -- the Fed is willing to pull back on its stimulus only because the labor market and other areas are picking up.

And the frustration could continue.

"We're going to have a very volatile second half of 2013," Uri Landesman, president of the Platinum Partners hedge fund, predicted to Bloomberg.

Facebook adds video to Instagram, with 15-second limit, filters, stabilization

Facebook's fourth product announcement of 2013 could end up being the new offering most popular with consumers: The social network has added video capabilities to its popular Instagram photo-sharing service, increasing functionality of the app that Facebook felt was worth $1 billion at the time of acquisition.

In an event at the company's Menlo Park headquarters, co-founder and CEO Mark Zuckerberg introduced Instagram co-founder Kevin Systrom, who revealed Instagram's user base has reached 130 million on a monthly basis, with 16 billion total photos shared and 1 billion likes per day.

With that strong foundation, Systrom announced the app's foray into video, saying that the Instagram team -- now three times the size it was at acquisition time -- had focused on three themes in its work: simplicity, beauty and community.

The updated app, which was already available for both Apple (AAPL) and Android devices Thursday, allows users to take 15-second videos and pause to change shots, while offering 13 video-only filters. The iOS version of the app also includes "Cinema," which can help cure shakiness in videos, and users can choose the frame that represents the video on social networks.

"What we did to photos, we just did with video," Systrom proclaimed.

The offering is seen as Facebook and Instagram seeking to challenge Twitter, which recently released the Vine video app, which allows users to take 6-second videos that endlessly loop.

Gartner analyst Brian Blau told Bloomberg News that, at first glance, the Instagram offering seems to trump Vine.

"You have to give a plus-one to Facebook at this point because they've added some extra features that are going to make the content a bit more compelling and more immersive," Blau said.

While Instagram offers more features and has an advantage with 10 times as many users as Vine, the Wall Street Journal pointed out that companies have taken to the service, with one report counting 50,000 brands using Vine. Systrom hopes brands will do the same with Instagram, saying that he hopes brands will "organically" share with their followers on Facebook and Instagram, but stated that it was not a driving force behind the change.

"This is really driven by consumer demand and not by business need," Systrom said. "On video, I don't think we designed it with any advertising in mind. We built it first for the user."

Facebook stock, which had risen 2.9 percent since announcing the product event Friday, dropped 1.7 percent in Thursday's barrage of losses on Wall Street, closing at $23.90

SV150 market report: Oracle falls after software sales disappoint

The SV150 moved starkly lower like the rest of the market, with Silicon Valley's largest tech companies declining 2.1 percent as a group. One of the area's largest companies didn't help its case after markets closed either, as Oracle announced disappointing software sales and found losses in after-hours trading.

While the Redwood City software giant produced more profits than analysts expected in its fourth quarter -- it reported earnings of 80 cents per share on sales of $10.9 billion, versus forecasts 75 cents per share on revenues of $11.1 billion -- new software licenses increased only 1 percent, hurting the company's outlook for the future.

"The fourth quarter is their biggest and most important software quarter and we have a miss here on software. It appears the missed sales execution continues," Edward Jones analyst Josh Olson told Bloomberg, continuing the theme from Oracle's last earnings report, which was blamed on a poor by the sales department.

In an attempt to sate unhappy investors, Oracle doubled its dividend and announced that it is increasing its stock-buyback program, while it also announced a switch from the Nasdaq to the New York Stock Exchange, effective next month. None of that helped the stock price immediately: After dropping 2.6 percent to $33.21 in regular trading, shares fell more than 8 percent to the $30.50 range in late trading.

While Cisco (CSCO) declined 1 percent to $24.43 while announcing a $180 million acquisition of a San Mateo data-virtualization firm, the rest of the networking sector was the only bright spot Thursday: Sunnyvale's Finisar gained 8.8 percent to $15.80 after its strong earnings report, and Juniper Networks followed along with a 0.3 percent gain to $19.19.

Elsewhere, all the news was grim: Yahoo (YHOO) dropped 3.4 percent to $25.35 as its acquisition of Tumblr closed, Apple fell 1.5 percent to $416.84 while presenting closing arguments in its e-books trial, and Google (GOOG) declined 1.8 percent to $884.74 as it faced yet more pressure from Europe. Other large-cap stocks did not perform any better, with Intel (INTC) dropping 3.3 percent to $24.18, Hewlett-Packard (HPQ) declining 2.8 percent to $24.72, eBay (EBAY) dropping 2.8 percent to $50.74 and Netflix (NFLX) moving 3.8 percent lower to $223.52.

Up: Finisar, Juniper

Down: Yelp, SunPower (SPWRA), Advanced Micro Devices, Applied Materials, Tesla, Netflix, Yahoo, Intel, LinkedIn, Electronic Arts (ERTS), HP, eBay, Nvidia, Oracle, Gilead, SolarCity, Adobe (ADBE), Google, NetApp, Facebook, VMware, Apple, Symantec, Zynga

The SV150 index of Silicon Valley's largest tech companies: Down 26.87, or 2.13 percent, to 1,234.42

The tech-heavy Nasdaq composite index: Down 78.57, or 2.28 percent, to 3,364.63

The blue chip Dow Jones industrial average: Down 353.87, or 2.34 percent, to 14,758.32

And the widely watched Standard & Poor's 500 index: Down 40.74, or 2.5 percent, to 1,588.19

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.