The S&P 500 index retreated on Tuesday from near a seven-month high after weaker-than-expected January U.S. retail sales data curbed investors' appetite for risky assets.
Leading the fall was the financial sector, with two of the top three biggest decliners on the Dow Bank of America and JPMorgan Chase & Co
Citigroup downgraded Bank of America Corp
The 0.4 percent rise in retail sales fell short of the 0.7 percent increase expected by economists polled by Reuters and reflected cutbacks in car purchases and online shopping.
The data shows that consumers are still hanging in there, just not as strong as we expected, said Scott Brown, chief economist at Raymond James at St. Petersburg in Florida.
It shows that we are still battling some headwinds here, but the economy is definitely in a recovery mode.
The disappointing data added to concerns stemming from Moody's Investors Service downgrade on Monday of credit ratings on six euro-zone countries.
The Dow Jones industrial average <.DJI> was down 42.54 points, or 0.33 percent, at 12,831.50. The Standard & Poor's 500 Index <.SPX> fell 6.30 points, or 0.47 percent, at 1,345.47. The Nasdaq Composite Index <.IXIC> was down 12.93 points, or 0.44 percent, at 2,918.46.
On Monday, the S&P 500 rose near a seven-month high, up more than 25 percent from a low in early October. The benchmark index has encountered strong resistance in the 1,355-1,360 area.
In other data, U.S. business inventories rose 0.4 percent in December, slightly lower than an estimated increase of 0.5 percent in December.
A third report showed import prices rose a touch more than expected in January as petroleum and food rebounded strongly, but underlying inflation pressure from imports remained muted.
Late Monday, Moody's put Britain's Aaa rating in jeopardy for the first time and warned it may cut France and Austria as well. Moody's also downgraded six euro-zone nations, including Spain and Italy.
But data from Germany on Tuesday suggested that Europe's bulwark economy is picking up pace again. The ZEW economic think tank's monthly poll of economic sentiment jumped to 5.4 from minus 21.6 in January, well above the consensus forecast in a Reuters poll of analysts for a rise to minus 12.0.
(Editing by Kenneth Barry)