NEW YORK - U.S. stocks fell on Thursday, with the downturn accelerating late in the day after a Federal Reserve official said the central bank could begin easing up on its monetary stimulus this summer.
The three major U.S. stock indexes had earlier traded in a tight range, supported by a gain of more than 12 percent in Cisco Systems (CSCO) shares and as investors took in a batch of economic data that pointed to slower growth.
But the S&P 500 finished near its session low following the comments from John Williams, the president of the Federal Reserve Bank of San Francisco, who also said the Fed could end its bond purchases later this year, assuming the labor market continues to grow stronger. Williams is not a voter on the Fed's policy-setting panel this year.
"When a Fed governor is out there and mentions this possibility, it does spook the market a little because I don't think anybody quite knows how the stock market is going to react once (the stimulus) is taken away," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.
The Fed's purchases of $85 billion a month in bonds has been a significant driver of the rally in equities that has taken indexes to record highs and pushed the S&P 500 up nearly 16 percent this year.
Analysts also said the comments could have been viewed as a reason to take a pause after such a strong run-up in stocks.
"It turned a boring day into a bit of profit taking," Ghriskey said.
The Dow Jones industrial average (^DJI) dropped 42.47 points, or 0.28 percent, to 15,233.22 at the close. The Standard & Poor's 500 Index (^GSPC) fell 8.31 points, or 0.50 percent, to end at 1,650.47. The Nasdaq Composite Index (COMPX) slipped 6.37 points, or 0.18 percent, to finish at 3,465.24.
Earlier, the Dow reached a fresh all-time intraday high at 15,302.49.
The Nasdaq fared better than the other two major indexes as Cisco shot up 12.6 percent at $23.89 after the network equipment maker posted a higher-than-expected quarterly profit and said current-quarter revenue could increase.
Economic data had set a lackluster tone in markets early in the day as factory activity in the mid-Atlanticregion contracted, while U.S. housing starts plummeted 16.5 percent in April. New claims for jobless benefits unexpectedly jumped last week.
However, investors had speculated that soft underlying inflation also means the Fed has room to continue its economic stimulus.
Wal-Mart Stores Inc (WMT) fell 1.7 percent to $78.50 and dragged on the Dow after the world's largest retailer posted a quarterly profit that missed expectations, with sales down 1.4 percent at U.S. stores open at least a year.
Tesla Motors Inc (TSLA) shares gained 8.7 percent to $92.25 after the electric carmaker said it aims to raise $830 million through a stock-and-debt offering that will be used to repay its U.S. Department of Energy loans with interest. The stock has surged more than 50 percent since the company reported earnings last week.
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Ford has been making cars through a fair number of cicada emergence cycles, and that's not going to change. Cars will naturally look materially different in 17 years; by then, it wouldn't be a shock to see self-driving cars in widespread use. Ford should continue to have a major role in the industry.
Naturally, there may be trends moving away from automobiles in general. The urbanization trend -- which features people flocking back to metropolitan areas where mass transit makes car ownership less important -- will likely continue. U.S. automakers may also continue to lose market share to overseas rivals.
However, it's hard to bet against Ford. Remember, Ford was the only major U.S. automaker to avoid the government's bailout in 2009, proving its mettle during tough times.
This pick will be controversial given the way that Apple's stock has been beaten down since peaking late last year. But the consumer tech giant is a survivor.
Since the last Brood II invasion we saw the iPod in 2001, the iPhone in 2007, and the iPad in 2010. Yes, Steve Jobs is gone, but denying Apple its historical bent to raise the bar in consumer electronics would be a costly mistake. Apple will find a way to innovate its way to growth and margin expansion.
Walmart's size endows it with pricing advantages that it passes on to its customers, giving the discount department store chain and edge that can't be matched. The future may find online retail and digital delivery eating into its share of some product categories. But at the end of the day, you don't bet against Walmart's ability to provide goods at prices that free shoppers to spend more on other things.
Despite remarkable changes in the world, some things have stayed constant from one cicada infestation to the next. Soap is still soap. Toilet paper is still toilet paper. Toothpaste is still toothpaste. And that probably won't change between now and 2030.
Procter & Gamble is home to large pantry of household brands that consumer know all too well. From Crest toothpaste to Bounty paper towels, it's hard to escape Procter & Gamble's reach. Some of its billion-dollar brands -- in other words, products that generate at least a billion dollars in annual sales -- include Pampers baby diapers, Duracell batteries, and Charmin toilet paper.
Its portfolio of products is so diversified that Procter & Gamble can weather the rare innovations that make a particular category obsolete. Along the way, patient investors get rewarded. Procter & Gamble has increased its dividend in each of the past 57 years.
The House of Mouse has been the undisputed champ of family entertainment for decades, but it's not something that Disney has taken for granted. Disney bought Capital Cities/ABC in 1995, a year before the last periodical cicada wave. It was a major purchase, and perhaps more for landing ESPN than ABC.
However, since the last Brood II emergence, the media giant has snapped up Pixar, Marvel, and most recently Lucasfilm to beef up its library of magnetic characters that it can build on through its cable properties, theme parks, and merchandising initiatives.
The way children consume media has evolved dramatically over the years, but digital media has presented new ways for Disney to cash in on the incessant appetite for family-friendly entertainment.
Besides, if there's a movie to be made that transforms cicadas into endearing insects in an animated theatrical release, it would be probably be Disney's handiwork.