Markets pull back ahead of reports

NEW YORK - Wall Street retreated yesterday as investors, casting a wary eye toward forthcoming economic data, cashed in some profits on the last trading day of April - the Dow Jones industrial average's best month since 2003.

Investors did manage to send the Dow to a trading high before pulling money out of the market ahead of today's manufacturing data from the Institute for Supply Management. Yesterday, the report's precursor, the Chicago Purchasing Managers' index of manufacturing activity in the Midwest, came in weaker than expected.

The Dow surged 5.7 percent in April, the biggest percentage gain since December 2003, thanks in large part to first-quarter earnings that were stronger than analysts predicted. Quarterly profits released by companies such as Verizon Communications Inc., Wm. Wrigley Jr. Co., Kellogg Co. and RadioShack Corp. extended that trend.

Economic data were mixed. Investors were pleased by the Commerce Department's report that core inflation, as measured by personal-consumption spending, was up 2.1 percent for the last 12 months ending in March - lower than the 2.4 percent rise in the 12 months ending in February. If inflation eases, the Federal Reserve is more likely to cut interest rates.

But the data also showed personal spending increased only 0.3 percent. That, along with a slim gain in construction spending and the weak reading on Midwest manufacturing, caused some restraint among investors who are concerned about the economy slowing too quickly - which could eventually hurt corporate profits.

"What the market is always going to ask is, what have you done for me lately?" said Alan Gayle, senior investment strategist at Trusco Capital Management Inc. "The good earnings news has at least to some degree been reflected in stock market prices - companies are going to have to continue generating these good numbers to see the market go higher."

The Dow fell 58.03, or 0.44 percent, to 13,062.91 after reaching a new trading high of 13,162.06. The Dow on Friday hit its 37th record close for the index since October, and is up 4.8 percent on the year.

Broader stock indicators fell further yesterday, with investors tending toward larger, more established companies because of signs of a cooling economy.

The Standard & Poor's 500 index fell 11.70, or 0.78 percent, to 1,482.37, while the Nasdaq composite index dropped 32.12, or 1.26 percent, to 2,525.09.

Bonds jumped on the data showing tame inflation and slow growth, which lower the chance of a rate increase. The yield on the benchmark 10-year Treasury note fell to 4.64 percent from 4.70 percent late Friday.

Gold prices rose. The dollar recovered slightly from Friday's decline, but still hovered near an all-time low against the euro.

Fueling the end-of-the-month sell-off, the National Association of Purchasing Management-Chicago said its index of manufacturing activity was 52.9 in April, below the average estimate and down from a reading of 61.7 in March - its highest level in two years. A reading above 50 in the index indicates growth in Midwest manufacturing, while a reading below 50 suggests contraction.