U.S. stocks faltered on Friday as weak oil futures pressured energy shares and a jump in the savings rate raised worries the economic recovery will not make much headway if consumers continue to be frugal.
Data showed that while consumer spending and income both rose in May as the government stimulus spread through the economy, much of the money was being socked away. Savings jumped to a record annual rate of $768.8 billion, the highest level since record keeping began in 1959.
We need people to spend money in order to keep the economy humming, said Joe Kinahan, chief derivatives strategist at online brokerage thinkorswim Group in Chicago. The consumer has been the stalwart of the economy at this point, and we still need them to be.
Even so, a separate report showed consumer sentiment rose in June to the highest since February 2008 as hopes grew that the recession is abating.
Energy shares weighed as oil futures fell below $70 a barrel after oil producer Nigeria said it would halt a battle with rebels during a two-month amnesty.
The Dow Jones industrial average <.DJI> dropped 50.41 points, or 0.59 percent, to 8,421.99. The Standard & Poor's 500 Index <.SPX> slipped 4.91 points, or 0.53 percent, to 915.35. The Nasdaq Composite Index <.IXIC> was off 3.29 points, or 0.18 percent, to 1,826.25.
The broad S&P had rallied as much as 40 percent from March's 12-year low, but the run-up has stalled as initial optimism about a stabilizing economy was tempered by worries the recovery could be tepid. The index is up about 35 percent from the March trough.
As investors try to gauge the market's next move, J.P. Morgan Securities said the S&P 500 is likely to fall to between 830 and 875 through September.
The strategists urged investors to use the correction to build positions in cyclical stocks.
In the energy sector, Chevron Corp
Other smartphone-makers cushioned losses on the Nasdaq, including Apple Inc
Analysts noted stocks were buffeted by profit taking after Thursday's gain of more than 2 percent, as well as end-of-quarter window dressing. This can add volatility as portfolio managers sell stocks with big losses and buy some of the quarter's best-performing issues to help improve their returns.
(Reporting by Leah Schnurr; additional reporting by Doris Frankel; editing by Jeffrey Benkoe)