US STOCKS-Wall St dips as data, HP offset stimulus fears

Thu May 23, 2013 12:53pm EDT

* Encouraging economic data help stocks retreat from lows

* HP jumps after raising 2013 outlook

* Investors fret about timing of Fed stimulus pullback

* Dow off 0.03 pct, S&P 500 off 0.3 pct, Nasdaq off 0.2 pct

By Leah Schnurr

NEW YORK, May 23 (Reuters) - U.S. stocks slipped on Thursday, recovering from session lows as encouraging domestic economic data and a rally in Hewlett-Packard's shares offset concerns about the timing of any reduction in the Federal Reserve's monetary stimulus.

Hewlett-Packard jumped nearly 14 percent and helped support the Dow a day after the world's largest PC maker raised its outlook. HP's sharp gains had briefly helped the Dow edge into positive territory at midday.

Signs of improvement in the housing and labor markets also helped indexes come off their lows by midday.

"The housing recovery has been so important to the markets and how people are thinking about the (economic) recovery," said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

For most of the morning, the market had been pulled lower by worries that the Fed's stimulus may be scaled back sooner than hoped and after weak factory data in China.

The Dow Jones industrial average edged down 4.37 points, or 0.03 percent, to 15,302.80. The Standard & Poor's 500 Index slipped 5.71 points, or 0.34 percent, to 1,649.64. The Nasdaq Composite Index shed 6.68 points, or 0.19 percent, to 3,456.62.

Hewlett-Packard Co shares jumped 13.7 percent to $24.14 a day after the computer maker raised its 2013 earnings outlook following quarterly results that beat low expectations.

Earlier, the S&P 500 traded below its 14-day moving average before bouncing back above it. Holding above that level would be positive sign to investors as it would suggest the uptrend is still intact.

Ralph Lauren Corp shares lost 2.4 percent to $183.51 after the fashion company reported sales below its own projections.

On Wednesday, the S&P 500 posted its biggest decline in three weeks after minutes from the U.S. Federal Reserve's latest meeting showed some officials were open to tapering large-scale asset purchases as early as at the June meeting.

The minutes came in the wake of comments from Fed Chairman Ben Bernanke, who said the Fed could scale back the pace of its bond purchases at one of the "next few meetings" if the economic recovery looked set to maintain forward momentum.

When the Fed may decide to slow or halt its program of buying $85 billion of bonds a month has become one of the biggest questions on investors' minds. The central bank's stimulus efforts have helped propel markets to all-time highs this year and investors are trying to gauge whether a change in the program could spell the end of the rally.

"It isn't their absolute level of involvement in buying bonds that's going to determine the stock market. It's going to be the perception of whether they're there or not," said Uri Landesman, president of Platinum Partners in New York.

"Once they really meaningfully step away, investors are going to realize they're just not going to be there and that the market's going to have to stand on its own feet."

On the economic front, the number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting strength in the labor market. New home sales rose in a sign that the sector's rebound is still intact. But separate data showed manufacturing slowed for a second straight month in May.