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New York -US stocks retreated from record peaks and finished lower after a sluggish week that was light on news and trading volume.
After the barrage of earnings and economic reports the previous week, this week's comparatively empty economic calendar heightened attention on the few major datapoints that surfaced.
The US trade deficit narrowed considerably in June, implying that economic growth was better than expected. Activity in the services sector picked up. And solid trade data from China and Germany suggested two of the world's biggest exporters are also doing better.
Despite these promising bits of news, the Dow Jones Industrial Average closed the week 232.85 (1.49%) lower at 15 425.51, while the broad-based S&P 500 fell 18.25 (1.07%) to 1,691.42. Both the Dow and S&P 500 finished at record highs last week.
The tech-rich Nasdaq Composite Index retreated 29.48 (0.80%) to 3 660.11.
Analysts described the drop as unsurprising given the market's impressive rise in 2013. The S&P 500 is about 19 percent on the year. Some see profit-taking at work.
Peter Cardillo, chief market economist with Rockwell Global Capital, characterized the week's losses as "a normal pull-back on light volume and light volume tends to exaggerate movements."
"It was a bit of a rough week... but not really all that negative," Cardillo said. "It certainly doesn't indicate that we're about to tumble."
"It's certainly disturbing to see the markets drop," said Jack Ablin, executive vice president and chief investment officer at BMO Private Bank.
"But at the same time, there's such light volume that it's really hard to know what the direction of the market is."
Analysts cited comments from several Fed officials that pointed towards a possible move to scale back the central bank's aggressive bond-buying program in September. These included remarks from Chicago Fed President Charles Evans, who is regarded as a dove on monetary policy.
The Fed comments "spooked the market," said William Lynch, director of investment at Hinsdale Associates, adding that the market had been expecting the Fed to taper the program at the end of the year.
The threat of a September taper is "probably the biggest thing overhanging the market right now," Ablin said.
Nine of 10 sectors in the S&P 500 saw declines last week.
The exception was materials, which includes companies like miner Freeport-McMoRan Copper & Gold and chemical titan Dow Chemical that benefit from a more bullish outlook on China.
One of the biggest sectoral losers for the week was financials, following news that indicated large banks still face considerable regulatory costs from the housing bust.
The Justice Department Tuesday filed suit against Bank of America alleging it defrauded investors in the sale of mortgage-backed securities. JPMorgan Chase, meanwhile, disclosed that it faces parallel civil and criminal probes on the sale of mortgage-backed securities.
Some technology companies enjoyed good rallies after earnings reports surprised to the upside. Online coupon company Groupon powered 21.6% higher after announcing a $300m share repurchase program.
Online travel company Priceline jumped 3.9% after besting profit expectations and projecting a year-over-year increase of 27-34% in travel bookings in the next quarter. Electric car company Tesla also surged.
Although earnings season has largely passed, next week's calendar still has some stragglers, including retail behemoth Walmart and technology giant Cisco.
The economic news calendar picks up considerably, featuring reports on retail sales, industrial production and housing starts.
