Stocks fell on Friday as data showed consumer spending was unexpectedly flat last month and growth of U.S. Midwest business activity slowed more than expected.
Investors jumped on the chance to book gains heading into a long holiday weekend and after Wall Street's rally in the previous session. May is on track to be the worst month for stocks since February 2009 after hitting an 18-month high in late April as investors fretted over a debt crisis in Europe and its implications for global growth.
The Commerce Department said April was the first month since September that consumer spending did not increase, but the largest gain in real disposable income in nearly a year gave hope that spending will resume in coming months.
A separate report showed business activity in the country's Midwest grew less than expected in May after scaling a five-year high in April. An employment gauge in the Institute for Supply Management-Chicago's survey slipped.
The spending number speaks to the sluggishness in the underlying economy, especially when you strip away all the incentives and impact of the stimulus, said Joseph Battipaglia, market strategist at Stifel Nicolaus in Yardley, Pennsylvania.
Consumers are on a slow path to recovery, and that blasts away the idea of a V-shaped recovery that's going to give us quarters of 6 percent GDP growth.
The Dow Jones industrial average <.DJI> was down 43.91 points, or 0.43 percent, at 10,215.08. The Standard & Poor's 500 Index <.SPX> was down 4.85 points, or 0.44 percent, at 1,098.21. The Nasdaq Composite Index <.IXIC> was down 11.31 points, or 0.50 percent, at 2,266.37.
Energy shares ranked among the biggest losers on Friday, a day after the S&P energy index <.GSPE> scored its largest gain in 14 months. At midday, the S&P energy index was down 1 percent. Halliburton dropped 7.1 percent to $25.08 and Schlumberger fell 5.7 percent to $56.44.
The U.S.-listed shares of BP Plc fell 4.7 percent to $43.27 after the company's chief executive officer said some progress had been made in its bid to plug the leaking Gulf of Mexico oil well, though it could still take 48 hours to conclude whether it has been fully successful.
Limiting the Nasdaq's decline, though, was Apple Inc , up 1.2 percent at $256.36 after Asian and European customers mobbed stores as the iPad tablet computer debuted outside the United States.
Bank of America Merrill Lynch raised its price target on the retail and technology bellwether by $25 to $325, expecting higher sales for iPads and iPhones.
Among retailers, shares of J Crew Group Inc gained 4.3 percent to $45.75 a day after the apparel company posted better-than-expected earnings.
Elsewhere on the economic front, the Thomson Reuters/University of Michigan Surveys of Consumers showed consumer sentiment rose a bit in May from April but was roughly unchanged from levels since February, while the one-year inflation expectations index also climbed to its highest since October 2008.
U.S. markets will be closed on Monday for the Memorial Day holiday.
(Reporting by Ryan Vlastelica; Editing by Jan Paschal)