Wall Street pulls back from its run toward new highs

Wall Street has pulled back from a run toward new records and appears to be hesitating amid indications that the US economy is showing fresh vigor -- perhaps too much for those looking for interest rate cuts.

Over the past week, the broad-market Standard & Poor's 500 came tantalizingly close to breaking its record set during the tech boom of 2000 but fell short as investors consolidated the hefty gains of recent weeks.

The Dow Jones Industrial Average of 30 blue chips lost 0.36 percent on the week to end at 13,507.28 ahead of the three-day Memorial Day weekend, retreating from its series of record highs.

The broad-market S&P 500 shed 0.46 percent for the week to 1,515.73, as it hovered near its all-time high of 1,527.46.

The tech-heavy NASDAQ composite dipped 0.05 percent to close the week at 2,557.19.

Good news on the US economy proved to be mixed for Wall Street. Analysts said that some investors had been counting on sluggish growth to spur the Federal Reserve to cut rates, which could then jump-start the economy and profits.

The market was surprised by a rise in new home sales, although that was tempered by lower sales of existing homes. A jump in durable goods orders suggested manufacturing is pulling out of its lethargy.

But strong data is seen by some as rekindling fears of a rate hike and prompting forward-looking investors to cash out of the market.

"If we have a combination of strong economic numbers and higher inflation, that might just reverse hopes of an interest rate cut, and people might begin to concentrate on a possible rate hike," said Peter Cardillo, analyst at Avalon Partners.

"I expect most of the data to point to a recovery in economic activity in the second half and slightly higher inflation but nothing that would trigger a Fed move either way," he said.

The Federal Reserve has held its base rate at 5.25 percent since June. Some analysts see a rate cut to help spark a sluggish economy even though the Fed argues that inflation is the biggest risk ahead.

One key report for the market this week will be the revised report on first-quarter GDP. The report is expected to show the economy stalled to a near-crawl with annualized growth of just 0.7 percent. But analysts say the figure has only limited relevance because it covers the January-March quarter and most investors are looking ahead instead of backward.

The yield on the 10-year Treasury bond climbed to 4.861 percent from 4.804 percent a week earlier while the 30-year bond yield climbed to 5.008 percent from 4.957 percent. Bond yields and prices move in opposite directions.