Wall St falls on talk of stimulus cut

Wall Street fell, giving up earlier gains, as comments by Federal Reserve Bank of New York president William Dudley suggested the central bank might reduce monetary stimulus provided by its bond-buying program.

"I believe a strong case can be made that the pace of growth will pick up notably in 2014," Dudley told the Business Council of Fairfield County in Stamford, Connecticut.

In late afternoon trading in New York, the Dow Jones Industrial Average fell 0.62 per cent, the Standard & Poor's 500 Index slid 0.34 per cent and the Nasdaq Composite Index declined 0.42 per cent. Earlier in the day, the S&P 500 had gained as much as 0.6 per cent.

To be sure, Dudley said in reply to an audience question that he "wouldn't want to rule out" asset purchases exceeding the current monthly level of US$85 billion if the central bank were to be "surprised on the downside" by weaker economic data, Bloomberg News reported.

Yet underpinning the view that the American economy is slowly but surely gathering strength were reports on auto sales and new orders.

Shares of Ford Motor, last up 2.7 per cent, gained on the strength of June sales new motor vehicle sales data. General Motors also reported better-than-expected sales for last month and is now forecasting the highest rate of sales since November 2007.

Separately, new orders for manufactured goods gained 2.1 per cent in May, after rising 1.3 per cent in April, according to Commerce Department data.

The labour market is one of the Fed's key benchmarks on US economic strength, helping determine its plans for stimulus. Chairman Ben Bernanke last month suggested the Fed would see a fall in the jobless rate to 7 per cent as a target for starting to ease pressure on the bank's stimulus pedal.

Unemployment will fall to about 7 per cent in the fourth quarter, according to a Bloomberg poll of economists at five of the world's largest banks. The June payroll report on Friday is expected to show that the jobless rate dipped a tenth of a percentage point to 7.5 per cent.

Daniel Silver, an economist at JPMorgan in New York, told Reuters that second-quarter GDP growth "is now tracking close to our forecast for 2.0 per cent." The US economy expanded 1.8 per cent in the first quarter.

In Europe, the benchmark Stoxx 600 Index finished the day with a 0.4 per cent drop from the previous close. The UK's FTSE 100 slipped 0.1 per cent, France's CAC 40 lost 0.7 per cent and Germany's DAX retreated 0.9 per cent.

Oil prices received a boost from concern about intensifying tension in Egypt.

West Texas Intermediate crude for August delivery climbed 1.6 per cent to US$99.53 a barrel on the New York Mercantile Exchange, after earlier touching US$99.87, the highest intraday level since September 14, according to Bloomberg News. Trading exceeded 926,000 shares, which would be the second-most this year.