Investors sold stocks Friday, further chilling the market's spring rally.
Stocks fluctuated in the early going on more signs that the economy's slide is slowing. But most advances eroded by the afternoon as traders accustomed to economic news being "less bad" found little incentive to buy.
According to preliminary calculations, the Dow Jones industrial average fell 62.68, or 0.75%, to 8,268.64. The broader Standard & Poor's 500 index dropped 10.20, or 1.1%, to 882.87, and the Nasdaq composite index slipped 9.07, or 0.5%, to 1,680.14.
Trading was choppy with the expiration of options contracts occurring Friday.
With the market still up than 30% from the 12-years lows of two months ago, many traders saw it as a safer bet to cash in some of the gains.
The Labor Department said consumer price index in April was flat, as economists predicted. And New York-area manufacturing activity and industrial production contracted less than economists expected. They also shrank significantly less than they did earlier in the year, fitting a trend seen in most data since early March: that the economy continues to slide, but at a slower pace.
A Reuters/University of Michigan index of consumer sentiment rose to an eight-month high in May. The improvement is a good sign as sentiment rebounds from a low in November. Increased confidence could translate to improved consumer spending.
Traders remained cautious ahead of several reports expected next week on housing, one of the economy's weak spots. And on Friday European countries reported on a massive 2.5% contraction in the first quarter.
Wall Street's huge spring rally has hit a lull. The government's stress tests of banks are done, earnings reports are winding down and the first wave of April economic data have been released. Investors are growing concerned that perhaps they got too optimistic when they saw signs of the economy bottoming.
"We've gotten through the panic point, and what will get us to the next level is seeing the economy actually grow. It'll happen, but it's a matter of when," Douglas Kreps, managing director at Fort Pitt Capital Group.
In mixed news for the market, the Treasury Department agreed to extend billions in bailout money to six major life insurers. The move is positive because it means the insurers will get more capital, but negative because it implies that the insurers' problems pose a serious risk to the financial system.
The Hartford Financial Services Group. said it is eligible for $3.4 billion from the Troubled Asset Relief Program, or TARP, while Lincoln National said it has been initially approved for a $2.5 billion injection.
Allstate, Ameriprise Financial, Principal Financial Group and Prudential Financial have also been approved for taxpayer loans. The capital invested in the six companies will total less than $22 billion, The Wall Street Journal reported Friday, citing a person familiar with the situation.
Energy stocks fell as oil prices slid $1.93 to $56.69 a barrel on the New York Mercantile Exchange.
Some consumer stocks rose after retailers turned in earnings reports this week that weren't as weak as feared.
Mixed economic and corporate reports have put a break on the market's rally but that could be good for stocks, said Dreyfus Chief Investment Officer Phil Maisano in New York.
He said the market is fairly valued here and off the levels when investors were fearful of a depression. Stocks are still factoring in a severe recession.
"We're clearly not going to have any form of a V-shaped recovery," Maisano said, referring to the pace of the rebound from the economy's tumble in the fall. "It will be a longer slog."
Even with the government's bank rescue and economic stimulus spending, Maisano expects the economy will still have a tough recovery.
"It was virtually a tourniquet. It stopped the bleeding but it doesn't have much effect on the healing at the moment," he said.
Next week, investors will get data on housing sales on Monday, on housing construction a day later and on regional manufacturing on Thursday. The reports could help drive the market but many analysts say more clear signs of an economic recovery, not just stabilizing, will be what is needed to propel Wall Street.
Bond prices fell after the inflation data. The yield on the 10-year Treasury note rose to 3.16% from 3.09% late Thursday.
The dollar was mixed against other major currencies, while gold prices rose.
Overseas, Britain's FTSE 100 fell 0.3%, Germany's DAX index slipped less than 0.1%, and France's CAC-40 rose 0.4%. Japan's Nikkei stock average rose 1.9%.