* Fed official says could ease QE3 by summer
* Tesla to raise $830 mln, stock resumes surge
* Wal-Mart falls after earnings miss
* Dow down 0.3 pct; S&P 500 down 0.5 pct; Nasdaq down 0.2
By Leah Schnurr
NEW YORK, May 16 U.S. stocks fell on Thursday,
with the downturn accelerating late in the day after a Federal
Reserve official said the central bank could begin easing up on
its monetary stimulus this summer.
The three major U.S. stock indexes had earlier traded in a
tight range, supported by a gain of more than 12 percent in
Cisco Systems shares and as investors took in a batch
of economic data that pointed to slower growth.
But the S&P 500 finished near its session low following the
comments from John Williams, the president of the Federal
Reserve Bank of San Francisco, who also said the Fed could end
its bond purchases later this year, assuming the labor market
continues to grow stronger. Williams is not a
voter on the Fed's policy-setting panel this year.
"When a Fed governor is out there and mentions this
possibility, it does spook the market a little because I don't
think anybody quite knows how the stock market is going to react
once (the stimulus) is taken away," said Tim Ghriskey, chief
investment officer of Solaris Group in Bedford Hills, New York.
The Fed's purchases of $85 billion a month in bonds has been
a significant driver of the rally in equities that has taken
indexes to record highs and pushed the S&P 500 up nearly 16
percent this year.
Analysts also said the comments could have been viewed as a
reason to take a pause after such a strong run-up in stocks.
"It turned a boring day into a bit of profit taking,"
Other Fed officials on Thursday called for the central bank
to stop buying mortgage-backed bonds, citing improvement in the
The Dow Jones industrial average dropped 42.47
points, or 0.28 percent, to close at 15,233.22. The Standard &
Poor's 500 Index fell 8.31 points, or 0.50 percent, to
end at 1,650.47. The Nasdaq Composite Index slipped 6.37
points, or 0.18 percent, to finish at 3,465.24.
Earlier, the Dow reached an all-time intraday high at
The Nasdaq fared better than the other two major indexes as
Cisco shot up 12.6 percent to $23.89 after the network equipment
maker posted a higher-than-expected quarterly profit and said
current-quarter revenue could increase.
Dell, in the midst of a takeover battle between
activist investor Carl Icahn and its billionaire founder,
reported a steep drop in quarterly profit after the closing bell
as personal computer sales continued to shrink. The stock
slipped 0.5 percent to $13.37 in after-hours trade.
During the regular session, Dell's stock dipped
0.2 percent to end at $13.43.
In other news after the close, J.C. Penney reported
that operating margins plunged in the first quarter while total
sales and same-store sales registered double-digit declines - in
line with its warning last week. The stock vacillated between
gains and losses, and was most recently down 1 percent at
$18.60. The company has gone back to basics with
marketing and promotions aimed at winning back customers, who
left in droves under the failed strategy of former Chief
Executive Ron Johnson.
Early in the day, economic data set a lackluster tone in
markets as data from the Philadelphia Federal Reserve showed
factory activity in the mid-Atlantic region contracted, while
the Commerce Department reported that U.S. housing starts
plummeted 16.5 percent in April. New claims for jobless benefits
unexpectedly jumped last week.
However, investors had speculated that soft underlying
inflation also means the Fed has room to continue its economic
Wal-Mart Stores Inc fell 1.7 percent to $78.50 and
dragged on the Dow after the world's largest retailer posted a
quarterly profit that missed expectations, with sales down 1.4
percent at U.S. stores open at least a year.
Tesla Motors Inc shares gained 8.7 percent to
$92.25 after the electric carmaker said it aims to raise $830
million through a stock-and-debt offering that will be used to
repay its U.S. Department of Energy loans with interest. The
stock has surged more than 50 percent since the company reported
earnings last week.
Volume was roughly 6.45 billion shares on the New York Stock
Exchange, the Nasdaq and the NYSE MKT, compared with the
year-to-date average daily closing volume of about 6.34 billion.
Decliners outnumbered advancers on the NYSE by a ratio of 3
to 2, while on the Nasdaq, 14 stocks fell for nearly every 11