US stocks declined on Thursday as investors opened the year on a cautious note after the S&P 500 wrapped up its best year since 1997, despite economic data pointing to continued growth in the economy.
The Institute for Supply Management said its index of national factory activity stood at 57.0 last month, in line with economists' forecasts but a touch below November's 2-1/2-year high of 57.3. A reading above 50 indicates expansion.
Earlier data showed weekly initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 339,000, the second weekly decline in a row, suggesting labour market conditions continue to steadily improve.
In another sign of economic improvement, financial data firm Markit said its final US Manufacturing Purchasing Managers Index rose to 55.0 last month, beating November's 54.7 reading and an initial December estimate of 54.4.
Other data showed US construction spending increased 1 per cent to an annual rate of $934.4 billion, the highest level since March 2009, as a surge in private construction projects offset a drop in public outlays.
The Dow Jones industrial average fell 88.62 points or 0.53 per cent, to 16,488.04, the S&P 500 lost 10.7 points or 0.58 per cent, to 1,837.66 and the Nasdaq Composite dropped 30.103 points or 0.72 per cent, to 4,146.487.
Apple Inc dipped 1.3 per cent to $555.59 as the biggest drag on both the S&P 500 and Nasdaq 100 indexes after Wells Fargo cut its rating on the iPad maker to "market perform" from "outperform."
The S&P technology index .SPLRCT fell 1 percent as the worst performing of the 10 major S&P sectors.
In a note to clients, Tobias Levkovich, chief U.S. equity strategist at Citigroup, boosted his year-end 2014 target for the S&P 500 to 1,975 from 1,900, citing earnings progress as the primary driver.
Volume is once again expected to be on the light side, as many market participants remain out of the office due to the New Year's holiday-interrupted week.
