U.S. stocks slipped, with benchmark indexes trimming their best monthly gains since February, before data Friday that may show the economy contracted in the first quarter while investors watch for progress on Greek debt talks.
Railroads led a drop among transportation companies, and Caterpillar Inc. fell 2.2 percent to lead industrials lower. McDonald’s Corp. lost 1.4 percent to pace a slide in consumer shares. Gains in Eli Lilly & Co. and Actavis Plc. helped lift health-care shares. Abercrombie & Fitch Co. soared 13 percent amid signs of improvement at its Hollister chain.
The Standard & Poor’s 500 Index dropped 0.1 percent to 2,120.79 at the close in New York, after earlier falling 0.5 percent. The index has advanced 1.7 percent in May, its best month since February. The Dow Jones Industrial Average sank 36.87 points, or 0.2 percent, to 18,126.12. The Nasdaq Composite Index lost 0.2 percent after closing yesterday at a record.
“It’s kind of the same movie we’ve seen over and over,” said Karyn Cavanaugh, the New York-based senior market strategist at Voya Investment Management LLC which oversees $215 billion. “We’re worried about what’s going on with the Fed, we’re worried about what’s going on with Greece. Then there’s always the strong dollar, throw a little of that in the mix and low oil prices, so the market is a little bit hard to predict on a day-to-day basis.”
The S&P 500 closed 0.3 percent off its record on Wednesday, rebounding from the biggest drop for U.S. stocks in three weeks after Greece said it was nearing a deal with its creditors.
Greece’s international creditors have since lined up to say that the two sides are still far apart on a debt-relief deal before a payment deadline next week. While Greece isn’t on the G-7’s official agenda, the topic may dominate discussions on the sidelines, as ministers from the world’s biggest economies urged a resolution of the crisis to stop it from spilling beyond Europe’s borders.
Meanwhile, investors continue to assess economic reports for clues on the timing of a Federal Reserve interest-rate increase. Data today showed jobless claims increased by 7,000, but remained below 300,000 for the 12th straight week. In a separate report, a measure of pending home resales climbed more than forecast to the highest level in nine years.
A report due Friday may also show the U.S. economy contracted in the first quarter, according to economists’ estimates, compared with a prior reading showing growth. Fed policy makers are preparing to raise rates that they’ve held near zero since December 2008, with economists expecting a first increase in September, according to a Bloomberg survey.
Fed Bank of San Francisco President John Williams said Thursday the U.S. will likely raise rates later this year as the world’s biggest economy recovers from a weak first quarter. His comments echo those of Fed Chair Janet Yellen, who said last week she still expects to raise borrowing costs this year if the economy meets her forecasts, with a gradual pace of tightening to follow.
Global markets retreated Thursday after Chinese stocks plunged the most in four months, as brokerages tightened lending restrictions and the central bank drained cash from the financial system. The Chicago Board Options Exchange Volatility Index climbed 0.3 percent to 13.31. The gauge, known as the VIX, is on track for its biggest weekly gain in six weeks.
Seven of the S&P 500’s 10 main groups declined, with industrial and energy companies leading the drop. Caterpillar slid 2.2 percent, the worst among the Dow stocks in its biggest retreat in almost four months. Mining equipment maker Joy Global Inc. slumped 3.2 percent, while industrial and construction equipment renter United Rentals Inc. tumbled 9.1 percent, the most since January.
About 5.7 billion shares changed hands on U.S. exchanges Thursday, 11 percent below the three-month average.
Transportation shares sank as railroads Kansas City Southern, CSX Corp. and Norfolk Southern Corp. fell at least 1.1 percent. The Dow Jones Transportation Average decreased 0.9 percent and was headed for a third straight monthly drop, the longest streak since Sept. 2012.
A Bloomberg index of U.S. airlines erased earlier gains to retreat for the sixth time in seven sessions. The measure is on track for its biggest monthly fall since Dec. 2013. Delta Air Lines Inc. and JetBlue Airways Corp. lost at least 0.7 percent.
Energy companies declined, even as West Texas Intermediate crude reversed losses to close higher. Southwestern Energy Co. and Consol Energy Inc. lost more than 3.5 percent. Chesapeake Energy Corp. slid 4.8 percent. The group is headed for its worst month since November, after posting an April that was the best month in more than two years.
Semtech Corp. dropped 13 percent to the lowest level since 2011 after weaker-than-anticipated demand from Samsung Electronics Co. pressured first-quarter earnings and revenue forecasts fell short of estimates.
Broadcom Corp. slipped 1.6 percent as Avago Technologies Ltd. agreed to buy the wireless chipmaker for $37 billion in cash and stock. Broadcom jumped 22 percent Wednesday on reports that a deal was imminent.
Apparel companies in the S&P 500 gained. Ralph Lauren Corp. jumped 2.8 percent, the most in six months, after being upgraded to buy at Goldman Sachs Group Inc. VF Corp. rose 2.4 percent, and Under Armour Inc. increased 1.9 percent.
Abercrombie surged 13 percent, the most in more than two years, after its teen-focused Hollister chain showed signs of improvement, a relative bright spot for a company struggling to make a comeback.
Western Digital Corp. rallied 5.2 percent for its biggest gain in a year, also after an upgrade to buy at Goldman Sachs. Chipotle Mexican Grill Inc. rose 2.8 percent after Miller Tabak & Co. raised the shares to buy, while Johnson Controls Inc. jumped 3 percent to an all-time high as UBS Securities LLC boosted the shares to buy.
GoPro Inc. rose 6.6 percent to a four-month high after the maker of action cameras announced plans to develop drone and virtual-reality businesses.