NEW YORK, June 17 — US stocks slipped yesterday as mixed economic data and Best Buy's disappointing sales spurred worries about an anaemic recovery.
After a three-month run that lifted the S&P 500 as much as 40 per cent from 12-year lows, analysts said the economy needs to start showing real improvement to support optimism about a budding recovery.
A rebound in May housing starts pointed to some stabilisation in that sector, but another government report showed industrial production had a steeper-than-expected slide last month.
Industrial production fell 1.1 per cent in May, while capacity utilisation, a measure of slack in the US economy, slumped to its lowest level on records dating back to 1967.
"It indicates that at a minimum, the market's taking a breather and may be starting a meaningful correction," said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, New York, concerning the market's losses.
"The worry is we've gone too far too fast and that we've overstated the strength of a recovery in the economy and earnings."
Best Buy Co Inc, the largest US consumer electronics retailer, posted weaker-than-expected sales in its first quarter and suggested earnings for the rest of the year would be worse than forecast. Its shares dropped 7.3 per cent to US$35.84. The S&P retail index tumbled 3.1 per cent.
Indexes ended at session lows. The Dow Jones industrial average fell 107.46 points, or 1.25 per cent, to 8,504.67. The Standard & Poor's 500 Index .SPX lost 11.75 points, or 1.27 per cent, to 911.97. The Nasdaq Composite Index was off 20.20 points, or 1.11 per cent, to 1,796.18.
The S&P 500 is still up 34.8 per cent from March's 12-year closing low. Declines have been shallow and short-lived, but analysts are increasingly looking for a larger pullback.
Johnson said he expects a correction of around 10 per cent.
Consumer discretionary and resource stocks were among the day's biggest losers. After earlier boosting the market, materials and energy shares fell as the US dollar strengthened. Chevron was down 1.7 per cent at US$69.88.
Single-family housing starts rose 7.5 per cent in May, the largest gain since January 2006, but analysts said that rising mortgage rates and high inventory are still headwinds for the sector at the heart of the financial crisis.
In other economic data, a smaller-than-expected rise in May's overall Producer Price Index suggested inflation pressures were muted.
Shares of big industrial manufacturers, whose fortunes are closely tied to a growing economy, fell, with blue-chip 3M Co down 1.5 per cent at US$58.41.
Trading volume was modest on the New York Stock Exchange, where about 1.18 billion shares changed hands, below last year's estimated daily average of 1.49 billion. On the Nasdaq, about 2.26 billion shares traded, below last year's daily average of 2.28 billion.
Decliners far outnumbered advancers on the NYSE by 2,160 to 848, while on the Nasdaq, decliners outran advancers by 1,876 to 753. — Reuters
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