U.S. stocks fell on Friday on a raft of weak data from China that signaled a slowing global economy, but the S&P 500 remained on track for a fifth straight week of gains.
Data on Chinese trade and bank lending suggested pro-growth policies have been insufficient in the face of weak demand from China's trading partners, and more urgent government action may be needed to stabilize the economy.
The S&P 500, which closed Thursday at a three-month high, fluctuated around 1,400 as the momentum of the recent rally stalled. Investor sentiment had been buoyed by expectations that central banks would loosen monetary policy further.
Trading has been relatively light in August, ahead of what is anticipated to be a busier September when market participants return from summer holidays and central banks, including the Federal Reserve and the European Central Bank, may swing into action.
"The European crisis is unresolved so the ECB will coming back into play, so people are setting up for some market moving events in September. Right now they welcome the low volatility," said Paul Brigandi, vice president of trading at Direxion Funds in New York.
The European Central Bank is expected to act soon, though not before September, to lower punishing borrowing costs for Spain and Italy as a way to stabilize the euro zone's economy.
"You have the Federal Reserve and the ECB with a very sharp focus on making sure things don't stall. Absent some outside shock, I think the path of least resistance for equities is up," said Jeff Meyerson, head of trading for Sunrise Securities in New York.
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The data on Chinese exports included a 16 percent decline in shipments to Europe from a year ago.
"After these numbers investors may want to see activity fairly quickly, especially from the ECB," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
The Dow Jones industrial average dropped 9.54 points, or 0.07 percent, to 13,155.65. The Standard & Poor's 500 Index dropped 1.44 points, or 0.10 percent, to 1,401.36. The Nasdaq Composite Index dropped 6.60 points, or 0.22 percent, to 3,012.04.
Cyclical stock sectors, including financials, energy, materials and consumer discretionary, fell.
The expectation of central bank action, however, may give support to equities as investors think twice about shorting the market on the possibility of any action.
Some economists said China's central bank could move as early as this weekend to ease policy. It has reduced banks' required reserve ratio in three steps since November to free up new lending and cut interest rates in June and July.
Yahoo shares fell 5.7 percent to $15.10 a day after the company said it may reconsider what it does with the cash it gets from a multibillion-dollar sale of half of its stake in Alibaba Group. Yahoo previously promised to return most of the cash to shareholders.
Manchester United shares were trading at $14.01, slightly above the initial public offering price of $14 after opening at $14.05. The stock priced well below its expected range on Thursday, valuing the British soccer club at $2.3 billion.
J.C. Penney shares rose 6.2 percent to $23.45 as the company said its second-quarter results showed a slowing in the flight of long-time customers reacting to a new pricing policy.
Research In Motion's U.S.-traded shares rose 4 percent to $8.11 after Bloomberg reported IBM Corp has considered buying RIM's enterprise division.
Fusion-io Inc shares jumped 28.4 percent to $26.98 after it projected late Thursday strong growth over the next year and the storage drive maker handily beat fourth-quarter profit estimates.