U.S. stocks fell, paring the seventh monthly gain for the Standard & Poor’s 500 Index, as better- than-forecast data on business activity and consumer confidence bolstered concern the Federal Reserve will scale back stimulus.
The S&P 500 fell 1.4% to 1,630.85 at 4 p.m. in New York.
“May will be the seventh month in a row where the S&P 500 has traded higher, and the markets are maybe looking for a reason to pause or consolidate,” Jim Russell, a senior equity strategist in Cincinnati at U.S. Bank Wealth Management, which oversees about $110 billion in assets, said by telephone. “We wouldn’t be surprised to see the market trade sideways to down in the weeks ahead on, call it, slow summer months, questions around Fed tightening and perhaps sluggish earnings growth in the second quarter.”
The S&P 500 retreated today after data showed consumer confidence advanced in May to the highest level in almost six years. Separate reports showed business activity rebounded in May after declining for the first time in more than three years last month, while consumer spending in the U.S. unexpectedly declined in April.
The data renewed concerns that the Fed would curtail its $85 billion in monthly bond purchases after Chairman Ben S. Bernanke said last week the central bank could reduce monetary stimulus, known as quantitative easing, if officials see signs of sustained improvement in growth.
“If the data comes in strong, it really reinforces the message that the Fed has been delivering over the past few weeks and probably justifies the tapering of QE,” Joseph Tanious, a New York-based global market strategist for JPMorgan Funds, which oversees $400 billion, said in a telephone interview.
Today’s decline left the S&P 500 down 1.1% in the past four trading days, giving it the first two-week decline since November. The benchmark equity gauge advanced 2.1% in May, the seventh month of gains for the longest winning streak since September 2009. The index has surged 141% since March 2009, driven by better-than-estimated corporate earnings and three rounds of bond purchases from the Fed.