U.S. 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 $85 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 U.S. 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 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 (M.N) 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 percent to $46.33. Rival Nordstrom Inc (JWN.N) lost 1.1 percent to $59.54.
But shares of retailer J.C. Penney Co Inc (JCP.N) jumped late in the session on high volume - 37 percent of trading in Penney's stock came in the last 10 minutes. The stock ended up 3.4 percent at $13.11. The New York Post said on Twitter that same-store sales are positive so far this month, citing sources.
Apple (AAPL.O) was another stand-out as the stock extended gains for a second day, ending up 1.8 percent at $498.50 after topping $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.
After the closing bell, shares of Cisco Systems Inc (CSCO.O) fell more than 9 percent to $23.97. The network equipment marker said it would cut 4,000 jobs, or 5 percent of its work force. Chief Executive John Chambers said the company aims to reduce costs and refocus on areas of growth in the face of uncertain demand for its networking equipment.
The bleak outlook from Cisco weighed on other tech companies, like competitor Juniper Networks Inc (JNPR.N), which fell 4 percent to $20.25 in extended trade. Hewlett-Packard (HPQ.N) fell 1.3 percent to $26.83 and Ciena (CIEN.O) lost 2.1 percent to $22.02.
The Dow Jones industrial average .DJI ended down 113.35 points, or 0.73 percent, at 15,337.66. The Standard & Poor's 500 Index .SPX was down 8.77 points, or 0.52 percent, at 1,685.39. The Nasdaq Composite Index .IXIC fell 15.17 points, or 0.41 percent, at 3,669.27.
The S&P 500, which has fallen six out of the past eight sessions, is down about 0.4 percent so far this week but for the year is up 18 percent.
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, U.S. producer prices were flat in July, below expectations for a 0.3 percent increase.
As the death toll in Egypt worsened, the Market Vectors Egypt Index ETF (EGPT.P) fell 3.3 percent to $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.