US stocks closed slightly lower on Thursday after investors digested a mixed batch of economic data and chose to sit tight ahead of the Federal Reserve's decision on interest rates next week.
AT&T Corp was a drag on the Standard & Poor's 500 index, a day after the telecommunications company issued a 2004 profit warning. Its shares fell 10 percent, or $1.60, to $14.81.
Shares of home builders gave the market a bit of support, lifted in the wake of a report showing new home sales surged to a record high, while strength in software makers like Microsoft Corp and Oracle Corp underpinned the Nasdaq.
Many investors remain reluctant to make big moves with a string of key political and economic events still looming, and traders were especially cautious, given the market's strong gains in the previous session, analysts said.
"There isn't enough good news right now to really get people involved," said Rick Meckler, president of investment firm LibertyView Asset Management. "Most professionals and individuals are just holding, looking for some clarity on the transition in Iraq, looking for some clarity on the presidential election, and, perhaps more importantly, looking for some clarity from the Fed on rate rises.
The Dow Jones industrial average fell 35.76 points, or 0.34 percent, to 10,443.81. The Standard & Poor's 500 Index dropped 3.44 points, or 0.3 percent, to 1,140.62, and the technology-laced Nasdaq Composite Index fell 5.41 points, or 0.27 percent, to 2,015.57.
Trading was moderate, with about 1.4 billion shares traded on the New York Stock Exchange, and about 1.7 billion shares traded on Nasdaq.
Uncertainty was keeping investors on edge, said Neil Massa, equities trader at John Hancock Funds.
"There's still a question of what's going to happen on the 30th, most importantly with the Fed," Massa said.
The Fed is widely expected to hike rates by a quarter of a percentage point at its next policy-setting meeting on June 29-30, and Wall Street is waiting to hear the Fed's accompanying statement for clues to how aggressive the central bank will be going forward.
Shares of Microsoft Corp climbed 0.3 percent, or 9 cents, to $28.39 after Banc of America raised its investment rating on the software company. Business software maker Oracle rose 3 percent, or 35 cents, to $11.50.
The Commerce Department said sales of new homes surged 14.8 percent to a record annual rate of 1.369 million units in May, sending shares of home builders flying. It was the biggest monthly climb since April 1993.
Shares of builder D.R. Horton Inc rose 37 cents, or 1.3 percent, to $29.43, after earlier rising as high as $31.01, while shares of Pulte Homes Inc advanced 45 cents, or 0.9 percent, to $53.69. Earlier, Pulte's stock hit a session high of $56.35.
A separate government report, however, reported that orders for long-lasting manufactured durable goods fell 1.6 percent in May, falling short of a forecast for a 1.4 percent increase in orders.
While, for some, the number pointed to economic sluggishness, others viewed the durable goods figure as an indication that the Federal Reserve would raise its short-term fed funds rate by a quarter percentage point rather than adopt a larger increase when it meets on Tuesday and Wednesday.
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