US STOCKS-Wall Street dips ahead of Fed, retail stocks slump

Wed Aug 21, 2013 1:02pm EDT

* Retail stocks drop after results, Staples sinks

* 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 dipped on Wednesday, with investors reluctant to make big bets before the Federal Reserve publishes the minutes of its July policy-setting meeting.

Retail stocks were among the weakest of the day, with several names falling sharply after results that pointed to continued consumer weakness.

Market participants have been cautious recently, with the S&P 500 dropping 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 policymakers have 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 p.m. (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 55.09 points, or 0.37 percent, at 14,947.90. The Standard & Poor's 500 Index was down 5.41 points, or 0.33 percent, at 1,646.94. The Nasdaq Composite Index was down 9.06 points, or 0.25 percent, at 3,604.53.

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."

Retailers were in focus for a second day, with earnings reports from Lowe's, Target and others. The SPDR S&P Retail ETF fell 1.5 percent.

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 as the S&P's biggest loser.

Target warned its annual profit may be near the low end of its forecast as consumer spending remains cautious, sending shares down 3.5 percent to $65.51.

Petsmart dropped 4.1 percent to $71.90 after its results, while American Eagle Outfitters slumped 9.7 percent to $14.79 after giving a weak outlook.

American Eagle weighed on Abercrombie & Fitch, which sank 3.8 percent to $46.64.

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.

Financial shares were among the weakest of the day, dropping 0.5 percent. Goldman Sachs was one of the biggest drags on the sector, down 1.2 percent at $157.59.

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.

Shares of Toll Brothers rose 0.6 percent to $31.82 after the largest U.S. luxury homebuilder reported a jump in revenue as the recovery in the housing market gathered pace.

Incyte Corp soared 29 percent to $34.88 after the company reported positive data from a mid-stage cancer drug trial.

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