Stocks dropped in a late sell-off on Thursday as investors feared that prices have risen too far, too fast.
Blue chips erased their gains after the Dow hit a 32-month high earlier in the session. Technology stocks, which have gained the most in the market's almost year-long rally, bore the brunt of the losses.
Stocks sold off right before the close after trading higher for much of the session after solid earnings from retail heavyweight Wal-Mart Stores Inc and Applied Materials Inc, the world's largest maker of microchip-making equipment. A trio of economic reports added to investor optimism.
Technical analysts may be looking to sell, said Chris Wolfe, head of equities at J.P. Morgan's private bank, after the major indexes crested near long-time highs for the second time in a month, with a dip in between.
The Dow Jones industrial average slipped 7.26 points, or 0.07 percent, to 10,664.73, according to the latest data. Earlier, the Dow jumped to 10,753.63, its highest level since June 21, 2001.
The broader Standard & Poor's 500 Index fell 4.76 points, or 0.41 percent, to 1,147.06. The technology-focused Nasdaq Composite Index dropped 30.51 points, or 1.47 percent, to 2,045.96.
Volume was heavy, with 1.52 billion shares changing hands on the New York Stock Exchange and 2.06 billion shares traded on Nasdaq. Decliners outnumbered advancers by a ratio of 2 to 1 on both the NYSE and the Nasdaq.
Some analysts are predicting the market's sideways action over the past few weeks will continue after last year's big run-up. Since the rally began last March, both the Dow and the S&P 500 have risen more than 40 percent, while the Nasdaq has gained 63 percent.
Reports on the economy were favourable on Thursday. Weekly jobless claims last week fell more than expected, while the index of leading economic indicators, a closely watched gauge of future US economic activity, showed its largest increase since October, and manufacturing in the US mid-Atlantic region expanded briskly.
Applied Materials shares fell 18 cents to $22.13 and ranked as the most active on the Nasdaq. Its stock dropped despite its better-than-expected quarterly profit and a new profit target that outpaced analysts' forecasts.
Wal-Mart tacked on $1.18, or 2.1 percent, to $58.38 and was the Dow's biggest percentage gainer.
The world's biggest company by revenue said quarterly profit rose 11 percent and forecast better-than-expected earnings for this year. RadioShack Corp, the No 3 US retail electronics chain, climbed $2.10, or 6.3 percent, to $35.41.
The company reported better-than-expected quarterly profit and forecast 2004 earnings would reach the high end of Wall Street estimates.
Shares of Intuit Inc, a maker of small business and personal finance software, dropped after its guidance for the current quarter fell short of Wall Street's average estimates.
Intuit said after the bell on Wednesday that its quarterly profit rose as the upcoming US income tax filing deadline fuelled a 36 percent increase in sales of its TurboTax software and issued its outlook.
The stock fell $3.95, or 8 percent, to $45.24, making it the biggest percentage loser on the Nasdaq 100.
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