US STOCKS-Manufacturing data pulls back Wall St from record highs
* Both S&P 500 and Dow coming off record closing highs
* Tesla Motors rallies after profit outlook
* European markets closed
* Indexes off: Dow 0.20 pct, S&P 0.58 pct, Nasdaq 0.90 pct
NEW YORK, April 1 (Reuters) - U.S. stocks declined on Monday after weaker-than-expected U.S. manufacturing data gave investors reason to book profits after both the Dow and S&P 500 set record closing highs in the prior session.
The Institute for Supply Management's March manufacturing reading of 51.3 continued to show expansion, but activity slowed from the 54.2 reading in February.
A separate report showed construction spending rose more than expected in February, gaining 1.2 percent, compared with forecasts of a 1 percent rise.
"We went into the first quarter with all the concern about the fiscal cliff, people had adjusted expectations lower, now expectations have come back up, so it's going to be a little bit tougher hurdle right now," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
"When you have that sort of a record run, the market finishes at an all-time high for the quarter, it's not unusual to see some profit taking."
The benchmark S&P index remains within 16 points of its record intraday high of 1,576.09, but moves may be limited this week in the absence of major catalysts before the closely-watched U.S. payrolls report on Friday.
The S&P 500 ended March with a record closing high, boosted by its best quarterly performance in a year, although the index struggled to reach the new record in recent weeks after another flare-up of the euro zone debt crisis.
For the year, the S&P is up 9.5 percent, the Dow is up 11.1 percent and the Nasdaq is up 7.4 percent.
With the strong start to the year, many investors have anticipated a pullback, with the market potentially facing more downside risks as uncertainty over the economic situation in Cyprus continues. European markets were closed on Monday for a holiday.
But with economic data not showing especially strong readings, investors speculate the Federal Reserve will continue the stimulus measures that have helped put a floor in equity prices and limiting dips.
The Dow Jones industrial average dropped 29.42 points, or 0.20 percent, to 14,549.12. The Standard & Poor's 500 Index lost 9.04 points, or 0.58 percent, to 1,560.15. The Nasdaq Composite Index fell 29.32 points, or 0.90 percent, to 3,238.20.
In company news, Tesla Motors Inc surged 18.1 percent to $44.74 after forecasting full profitability in the first quarter, citing strong sales of its Model S sedan.
Apple Inc shares fell 2 percent to $433.83 and were the biggest drag on both the S&P 500 and Nasdaq 100 indexes. Portfolio manager Will Danoff, whose $92 billion Fidelity Contrafund is the largest active shareholder in Apple, cut the fund's stake in the iPhone maker 10 percent during the first two months of 2013.
Dell Inc warned that it would be dangerous to take on a lot of debt and remain a public company given its worsening profit outlook, in a sign that it views proposals from Blackstone Group LP and billionaire investor Carl Icahn as fraught with risk. The comments came on Friday, which was a holiday for U.S. markets.
Shares of Dell dipped 0.6 percent to $14.25.
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