NEW YORK (REUTERS) - United States (US) stocks fell on Wednesday, with the Dow industrials posting the worst day since late June, as investors speculated when the Federal Reserve might begin to reduce its ultra-loose monetary policy, which has helped propel stocks to record highs.
Trading volume has been low as the earnings season winds down and economic indicators present a mixed view, complicating predictions of the Fed's next policy action. The Fed has been buying US$85 billion (S$107.5 billion) in bonds each month to keep interest rates low. Some analysts expect the Fed to start tapering bond purchases as early as September if data shows the economy is improving.
Wednesday's decline accelerated in the final hour of trading after a top Fed official said the US central bank, which meets again in September, should have more evidence about the economy and inflation before it can make a decision.
"There is a growing consensus that individual data points don't really matter at this point and that the Fed has made up its mind to have completed the bond purchases by the middle of next year," said Mr Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York.
Retail stocks were among the day's top decliners after Macy's Inc department store reported an unexpected decline in sales and blamed hesitation by consumers to spend on non-essential items. Shares of Macy's fell 4.5 per cent to US$46.33. Rival Nordstrom Inc lost 1.1 per cent to US$59.54.
But shares of retailer J.C. Penney Co Inc jumped late in the session on high volume - 37 per cent of trading in Penney's stock came in the last 10 minutes. The stock ended up 3.4 per cent at US$13.11. The New York Post said on Twitter that same-store sales are positive so far this month, citing sources.
Apple was another stand-out as the stock extended gains for a second day, ending up 1.8 per cent at US$498.50 after topping US$500 a share. On Tuesday, investor Carl Icahn, using Twitter, said that he has a large position in Apple.
Hedge fund filings with regulators also showed that Leon Cooperman's Omega Advisors took a stake in Apple.
The Dow Jones industrial average ended down 113.35 points, or 0.73 per cent, at 15,337.66. The Standard & Poor's 500 Index was down 8.77 points, or 0.52 per cent, at 1,685.39. The Nasdaq Composite Index fell 15.17 points, or 0.41 per cent, at 3,669.27.
The S&P 500, which has fallen six out of the past eight sessions, is down about 0.4 per cent so far this week but for the year is up 18 per cent.
St. Louis Federal Reserve President James Bullard said the central bank needs to gather more evidence that the economy is improving and inflation heading higher before deciding to taper its bond buying.
In economic news, US producer prices were flat in July, below expectations for a 0.3 per cent increase.
As the death toll in Egypt worsened, the Market Vectors Egypt Index ETF fell 3.3 per cent to US$44.61. The country's interim vice president resigned and a state of emergency was imposed following political clashes in the country.
Volume was roughly 5.4 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, below the average daily closing volume of about 6.4 billion this year.
On the NYSE, advancing stocks beat decliners by 2,032 to 960. On the Nasdaq, advancing stocks beat decliners by 1,441 to 1,033.