Signs of a slowing economy combined with comments from a Federal Reserve official helped pull the stock market down Thursday.
The news on the U.S. economy gave investors little to get excited about. Applications for unemployment benefits rose last week and manufacturing slowed in the mid-Atlantic region. Wal-Mart Stores sank after warning of weaker earnings ahead.
The Dow Jones industrial average fell 42.47 points to 15,233.22, a loss of 0.3 percent. The Standard & Poor's 500 index dropped 8.31 points to 1,650.47, or 0.5 percent. Both indexes closed at record highs the day before. It was only the third drop for the S&P this month.
"We've had such a tremendous run," said J. J. Kinahan, chief strategist at TD Ameritrade. "On a day with a bunch of disappointing data, you're looking for some good news to hold on to."
The manufacturing report from the Philadelphia branch of the Federal Reserve sent bond prices up and turnedstocks lower in morning trading. The stock market recovered before noon, then spent most of the day with slight gains until shortly after 3 p.m.
That's when news crossed that John Williams, head of the Federal Reserve's San Francisco branch, told an audience that the Fed could end its bond-buying program this year. But Williams' comments made clear that the Fed would only curtail its stimulus effort when the economy looked strong enough.
Cisco jumped 13 percent, or $2.68, to $23.89. The network-equipment maker turned in quarterly results late Wednesday that beat analysts' expectations, with the help of better revenue from the U.S. and emerging markets. Cisco's performance is often considered a gauge of the technology industry's strength, and techstocks fared better than the rest of the market Thursday. Technology was the only one of the 10 industry groups in the S&P 500 index to close higher.
The Nasdaq composite index lost 6.37 points to 3,465.24, a drop of 0.2 percent.
Wal-Mart fell 2 percent. The world's largest retailer turned in weaker sales and a dim forecast for profits. The company blamed bad weather and delayed tax refunds for earnings and sales that fell short of what analysts had expected. Wal-Mart's stock lost $1.36 to $78.50.
Companies have reported record quarterly profits this earnings season. Seven of every 10 in the S&P 500 have trumped analysts' earnings estimates, according to S&P Capital IQ. Earnings have climbed 5 percent over the year before.
But revenue has looked weak: six out of every 10 companies in the S&P 500 have missed forecasts, and revenue has edged up just 1 percent. Without higher sales, companies are getting more of their profits from laying off staff and other cost-cutting moves.
Scott King, an investment adviser at Unified Trust Co. in Lexington, Kentucky, said that if the market is going to keep climbing this year, sales will have to start rising. Analysts are looking for that to happen as economic growth gains strength later this year.
"It's hard to see how companies can squeeze more earnings growth out of cost savings," King said. "At some point, the economic numbers and revenue have to pick up."
The Philadelphia branch of the Federal Reserve reported that manufacturers in the region said business conditions slumped this month. Orders for manufactured goods and shipments have been weak.
In Washington, the Labor Department reported that the number of Americans seeking unemployment benefits rose last week to 360,000. That suggests companies are laying more people off, just one week after applications for benefits hit a five-year low.
The yield on the 10-year Treasury note dropped to 1.88 percent from 1.94 percent late Wednesday. It's a sign that traders are shifting money into lower-risk investments like U.S. government debt.
Gold prices fell slightly and the price of crude oil edged higher. Gold fell $9.30 to $1,386.90 an ounce. Crude oil rose 86 cents to $95.16 a barrel in New York.