REFILE-US STOCKS-Wall St flat in volatile trade; S&P set for strong May

Fri May 31, 2013 12:50pm EDT

* S&P 500 on track for seventh straight month of gains

* Data signals soft U.S. economy but not abrupt slowdown

* Volatile trading continues on profit-taking, buying the dip

* Dow up 0.04 pct; S&P 500 down 0.1 pct; Nasdaq off 0.01 pct

By Angela Moon

NEW YORK, May 31 (Reuters) - U.S. stocks held steady by midday on Friday in a volatile session with constant profit-taking and "buying the dip" activities keeping the market mostly unchanged.

In late morning trade, investors took earlier dips in the market as buying opportunities, while some economic data pointed to the likelihood of the U.S. Federal Reserve maintaining its easy money policy. But by midday, the trading was back into profit-taking mode.

The S&P 500, on track to close out a seventh straight month of gains, has climbed 3.6 percent in May and 15.9 percent in 2013 after repeatedly scaling new record highs. Over the past seven months, the index has appreciated about 17 percent.

Trading has been volatile for most of the week as investors reacted to small declines in the market by almost immediately buying more shares. The mood, however, was tempered by concerns about the Fed easing its monetary policy, which has bolstered the U.S. economy.

In the latest piece of data that eased some anxiety about the Fed, consumer spending fell in April for the first time in almost a year and inflation pressures were subdued, pointing to a slowdown in economic activity.

Consumer spending, which accounts for about 70 percent of U.S. economic activity, was held down by weak demand for utilities and a decrease in receipts at gasoline stations following a drop in gasoline prices at the pump.

When adjusted for inflation, consumer spending increased just 0.1 percent in April after rising 0.2 percent in March.

"The data is confirming that the Fed is quite a long way away from having to raise interest rates to control inflation," said Tim Ghriskey, chief investment officer of Solaris Group, in Bedford Hills, New York.

The Dow Jones industrial average was up 6.13 points, or 0.04 percent, at 15,330.66. The Standard & Poor's 500 Index was down 1.90 points, or 0.11 percent, at 1,652.51. The Nasdaq Composite Index was down 0.50 of a point, or 0.01 percent, at 3,490.80.

Equities initially opened lower as investors took profits following recent gains, but the market pared those losses after the Chicago Purchasing Managers Index came in stronger than expected in May with a reading of 58.7, above forecasts that called for a reading of 50.

The stock market's advance has come largely on supportive monetary policies from central banks around the world, which has helped the markets ignore the Wall Street adage of "sell in May, go away," which refers to a historical trend of seasonal weakness that tends to begin in May and continue through the summer. In May 2012, the S&P 500 fell 6.3 percent.

"We're in a goldilocks environment where the economy is recovering, but not so much that the Fed will pull the punch bowl away too quickly," said Kristina Hooper, head of portfolio strategies at Allianz Global Investors in New York.

Netflix Inc was one of the biggest gainers of the day, jumping 2.1 percent to $227.37 and supporting the Nasdaq.

The Thomson Reuters/University of Michigan final reading on consumer sentiment for May was 84.5 - the highest level since July 2007 - and above expectations for a reading of 83.7.

Trading may be volatile near the market's close because the MSCI indexes are slated to rebalance at the end of the day. Credit Suisse forecast $19 billion in total trading as a result of the rebalancing, with $15 billion related to developed markets.

In company news, Palo Alto Networks shares lost 9.9 percent to $49 after the company gave an outlook that was below expectations.

The Food and Drug Administration denied approval late Thursday to Endo Health Solutions Inc's injectable testosterone drug, asking for a better risk-management plan. Endo's stock, however, rose 1.9 percent to $36.62 in trading at midday on Friday.

One of the biggest minority shareholders in Clearwire Corp on Thursday urged the wireless company to recommend rejection of Sprint Nextel Corp's buyout offer after Dish Network Corp made a counter bid.

Clearwire shares fell 0.9 percent to $4.46. Sprint shed 0.4 percent to $7.31.

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