US STOCKS-Wall Street retreats as eyes turn to Fed

Wed Aug 21, 2013 11:52am EDT

* Staples tumbles, Lowe's rises after results

* Home resales hit more than three-year high

* Goldman Sachs falls, weighs on financials

* Indexes off: Dow 0.4 pct, S&P 0.3 pct, Nasdaq 0.1 pct

By Ryan Vlastelica

NEW YORK, Aug 21 (Reuters) - U.S. stocks edged lower on Wednesday, with investors reluctant to make big bets before the Federal Reserve publishes the minutes of its July policy-setting meeting.

Market participants have been cautious recently and the S&P 500 has dropped for five of the past six sessions amid uncertainty over how soon the Fed will begin to wind down its $85-billion a month stimulus program.

The central bank said the policy, which has fueled Wall Street's steep gains this year, could be slowed as early as September, assuming economic growth meets its targets.

The Fed minutes, scheduled to be released at 2:00 p.m. EDT (1800 GMT), may provide clues to the timing and scope of the potential easing.

"Everyone is searching for clarity. There's confusion over how much things will be tapered, if at all, and while there may not be any surprise, everyone is waiting to dissect what comes out," said Mike Gibbs, co-head of the equity advisory group at Raymond James in Memphis, Tennessee.

In the latest economic report, U.S. home resales rose in July to their highest level in over three years, suggesting that a surge in mortgage rates is having only a limited impact on the housing market recovery.

The Dow Jones industrial average was down 54.57 points, or 0.36 percent, at 14,948.42. The Standard & Poor's 500 Index was down 5.10 points, or 0.31 percent, at 1,647.25. The Nasdaq Composite Index was down 3.80 points, or 0.11 percent, at 3,609.79.

The S&P 500 rose on Tuesday to halt a four-day losing streak but remained under technical pressure as it closed below its 50-day moving average for a third straight session. The level, near 1,658, is becoming technical resistance.

"I was hoping to see follow-up to (Tuesday's) rally, but so far, the sellers are back in control," said Gibbs, who helps oversee $450 billion in assets. "Keeping yesterday's momentum is important."

Financial shares were among the weakest of the day, dropping 0.7 percent. Goldman Sachs was one of the biggest drags on the sector, down 1.4 percent at $157.27.

Market makers and traders waited to hear details on a flood of erroneous trades that hit U.S. equity options markets on Tuesday when Goldman Sachs sent orders accidentally because of a technical error.

Retailers were in focus for a second day, with earnings reports from Lowe's, Target and others. The SPDR S&P Retail ETF fell 1.2 percent to $79.14.

Target warned its annual profit may be near the low end of its forecast as consumer spending remains cautious, sending shares down 4 percent to $65.25.

Staples reported weaker-than-expected quarterly results on dismal sales in international markets and cut its outlook for the year. Shares slumped 13 percent to $14.60. .

On the upside, home improvement chain Lowe's rose 4.9 percent to $46.27 after it reported a bigger-than-expected rise in profit and sales as the housing market's recovery encouraged people to spend more on their homes.

Shares of Toll Brothers rose 1 percent to $31.97 after the largest U.S. luxury homebuilder reported a jump in revenue as the recovery in the housing market gathered pace.

Incyte Corp soared 27 percent to $34.19 after the company reported positive data from a mid-stage cancer drug trial.

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