US stocks retreat amid speculations of Fed tapering stimulus

US stocks fell for a third day on Thursday as investors continued to asses the prospects of stimulus tapering by Fed and the appeal of taking money off the table after the markets record-breaking rally.

The S&P 500 lost 6.72 points, or 0.4%, to 1775.50. The Dow Jones Industrial Average declined 104.10 points, or 0.7%, to close at 15739.43, its lowest finish since November 7. The Nasdaq Composite Index slid 5.41 points, or 0.1%, to 3998.40.

Signs of improved economic activity, coupled with a congressional budget deal, have made investors worried that the Fed will decide to scale back its easing efforts at next weeks policy-setting meeting.

“Given how much the market has rallied, investors are trying to set themselves up for the Fed,” said Michael Purves, chief global strategist at Greenwich, Conn.-based brokerage Weeden & Co.

Weak jobs data on Thursday contrasted with an upbeat reading on consumer spending, providing few clear signals for the Fed. Claims for initial claims for jobless benefits increased by 68,000 to 368,000 in the latest week, well above expectations of 328,000. Separately, consumers spent slightly more freely in November than expected.

Joel Huffman, senior portfolio manager at U.S. Bank Wealth Management, said to the Wall Street Journal that he doesnt think the Fed will take action next week, but expects to see increased volatility around economic data reports.

“It wouldnt be surprising to see a correction or a dip,” he said. “Were going to see moves trending along with the most recent headlines.”

In corporate news, Facebook jumped almost 5% after S&P Dow Jones Indices announced late Wednesday that the social-media company will join its S&P 500 and S&P 100 indexes. Funds that track those benchmarks will need to buy Facebook prior to the close of trading December 20.

Lululemon Athletica slumped 11.7% after the yoga-gear maker provided outlooks for fiscal fourth-quarter earnings and revenue that were below analyst projections, citing “macro and execution issues.”

Cisco plunged 1.6% to $20.88. The company “failed to demonstrate” that the EU was wrong to find the merger in line with the bloc’s internal market, the EU General Court ruled yesterday. The Microsoft-Skype merger “does not restrict competition” in the markets for consumer- and business-video communications, said the court.

Home Depot Inc. gained 0.5% to $79. The largest U.S. home-improvement retailer said it will meet a profitability goal a year earlier than planned as rising housing prices prompt an increase in renovations. Operating margin will expand to 12% by the year ending January 2015.