Wall Street ends down on fears Fed may scale back stimulus
NEW YORK (Reuters) - Stocks ended lower on Tuesday, resuming their recent decline as investors sold growth-oriented sectors on speculation the Federal Reserve may slow the pace of its economic stimulus.
The move follows a roughly 2 percent retreat in the last two weeks from a seven-month run of gains, which had been driven largely on continued economic support from the central bank.
"It seems as though perhaps investors are tiring at the moment of being long equities, while (the market has) been in this trading range. It has been failing to resume its enthusiasm, and I think it's inviting investors" to take profits, said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
He said the S&P 500 seemed to be slowly moving closer to its 50-day moving average, which stands at around 1,602.
"The market has taken on kind of a heavy feel to it," he added.
Growth-oriented sectors were among the hardest hit, a switch from last week when investors booked profits in high-dividend-paying shares. The S&P financial index .SPSY was down 0.9 percent, while the telecommunications index .SPLRCL was up 0.9 percent.
Kansas City Federal Reserve Bank President Esther George, who has been a steady critic of the bond-buying program and has voted against it at every Fed meeting so far this year, again urged the Fed to ease off its aggressive purchases. George said slowing bond buying would help wean financial markets off their dependence on ultra-easy money from the U.S. central bank.
The Dow Jones industrial average .DJI was down 76.49 points, or 0.50 percent, at 15,177.54. The Standard & Poor's 500 Index .SPX was down 9.04 points, or 0.55 percent, at 1,631.38 for the day, but remains up 14.4 percent for the year.
The Nasdaq Composite Index .IXIC was down 20.11 points, or 0.58 percent, at 3,445.26.
The Dow's decline ended a 20-week-long streak of gains on Tuesdays.
All three indexes had been down more than 1 percent during the session. Intraday market volatility has picked up since minutes from the U.S. central bank's latest meeting and recent remarks by Fed Chairman Ben Bernanke heightened concerns the Fed may reduce the pace of its bond-buying program sooner than expected.
Market breadth was also negative, with decliners outpacing advancers on the New York Stock Exchange by nearly two to one.
Dollar General Corp (DG.N) dropped 9.2 percent to $48.64, the worst percentage performer on the S&P 500, after the discount chain cut the top end of its full-year profit forecast. The company also warned of moderating sales growth and declining margins as frugal shoppers make it difficult to raise prices.
Salesforce.com Inc (CRM.N) shares slid 7.9 percent to $37.80 after it said it will pay $2.5 billion for marketing software maker ExactTarget Inc ET.N. Shares of ExactTarget soared 52.4 percent to $33.69.
Driving the Salesforce.com declines were investor fears that the bid, priced at $33.75 a share, will depress margins in the near term. <ID:L1N0EG18Y>
Though defensive sectors have outperformed growth sectors in much of this year's rally, they look less attractive for the second half of the year, Goldman Sachs analysts wrote in a research note. They recommend underweighting health care and consumer staples.
Volume was roughly 6.8 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, slightly above the average daily closing volume of about 6.4 billion shares this year.
Decliners outpaced advancers on the Nasdaq by two to one.
(Editing by Nick Zieminski, Kenneth Barry, G Crosse and Leslie Adler)
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