Economic conditions still stormy

U.S. stocks retreated, with the Standard & Poor’s 500 Index (CME:SPM14) falling a third day, after data showed a rise in jobless claims and a smaller-than-estimated gain in retail sales.

The S&P 500 fell 0.1% to 1,942 at 9:30 a.m. in New York. The Dow Jones Industrial Average slid 10.08 points, or 0.1%, to 16,833.80.

“People are looking for a reason to sell stock right now,” Dan McMahon, director of institutional equity trading at Raymond James and Associates, said in a phone interview. “The numbers were a little disappointing. You can’t make new highs everyday.”

The S&P 500 lost 0.4% yesterday and the Dow average halted a five-day rally as the World Bank cut its forecast for global growth and investors weighed equity valuations. The broader index trades at 16.4 times forecast earnings, up from a multiple of 14.8 at the beginning of February. The gauge had closed at a record for four straight sessions through June 10.

Retail sales rose 0.3% in May as American consumers took a respite following a three-month surge in shopping. The gain followed a revised 0.5% gain in April that was much larger than previously estimated, Commerce Department figures showed. The median forecast of 83 economists surveyed by Bloomberg called for a 0.6% advance.

Measured Fashion

A separate report indicated applications for unemployment benefits in the U.S. rose to 317,000 last week. The median forecast of 52 economists surveyed by Bloomberg called for 310,000. Claims have averaged around 324,000 so far in 2014.

“There is some indication that the economy continues to move forward in a fairly measured fashion,” Rob Lutts, chief investment officer at Salem, Massachusetts-based Cabot Money Management Inc., said in a phone interview. He oversees $600 million of assets. “I think this perpetuates the worry that investors have today. What they want is that clear blue sky economic condition, and we don’t have that.”

The S&P 500 advanced 7.1% through yesterday since a low on April 11 as data showed the U.S. economy is recovering from the impact of extreme weather earlier this year. The Federal Reserve is watching the labor market as it moves to complete a monthly stimulus program late this year. Three rounds of bond buying have helped propel the S&P 500 higher by as much as 188% from its bear-market low in March 2009.

Investors are also watching Iraq where Islamic militants extended gains after capturing the country’s second-biggest city, while the U.S. weighed an Iraqi request for air support. Oil climbed to an eight-month high on concern the fighting will disrupt supplies. Iraq is the second-largest producer in OPEC.

“We’re following the situation in Iraq closely,” Nicola Marinelli, who helps oversee about $190 million at Sturgeon Capital Ltd. in London, said by telephone. “Overall it’s not positive, but it’s a very fluid situation and can change very quickly.”

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