Stocks fell on Thursday after several days of muted trading as investors took a defensive posture before Federal Reserve Chairman Ben Bernanke's much-awaited speech on Friday.
Bernanke is due to speak at a symposium of central bankers in Jackson Hole, Wyoming, at 10 a.m. (1400 GMT) and is expected to stoke expectations of a third round of quantitative easing, though he may not detail the timing of the Fed's action.
U.S. economic data over the past two weeks have been a little stronger than expected, and Reuters polls show investors and economists were more skeptical the Fed will announce a new round of bond buying at its September meeting.
All 10 S&P industry sectors were lower, with technology <.GSPT> and energy <.GSPE> both off at least 1 percent as the worst-performing sectors. The overall index once again tested the 1,400 mark, which has acted as a support level recently.
Over the past three weeks, the index has traded in a tight range between 1,400 and the April 2 high of 1,422.38, which has acted as a resistance point.
The S&P index has risen nearly 7 percent since the end of May, so investors appeared to pull back ahead of any market turbulence that might follow Bernanke's speech.
"I suspect the hedges that people felt they needed are in place. That's why the market is where it is," said Gordon Charlop, managing director at Rosenblatt Securities in New York.
"But I don't see it getting worse from here. They will hold the line."
Volume was anemic, with 2.36 billion shares traded with less than three hours left in the session on the New York Stock Exchange, NYSE Amex and Nasdaq. Daily average volume is 6.54 billion.
The daily trading volume, which has been at 2012 lows this week in a reflection of investors' reluctance to place big bets before Bernanke's speech, could weigh on profits at exchanges and brokerages.
Fueling further caution among investors was the European Central Bank meeting on September 6 and a host of U.S. economic data scheduled for next week, including the Labor Department's payrolls report for August.
The S&P had barely budged over the prior three sessions - resulting in a decline of merely 0.05 percent - and hasn't closed with a 1 percent move in either direction since August 3.
The Dow Jones industrial average <.DJI> dropped 93.42 points, or 0.71 percent, to 13,014.06. The Standard & Poor's 500 Index <.SPX> fell 10.06 points, or 0.71 percent, to 1,400.43. The Nasdaq Composite Index <.IXIC> lost 30.66 points, or 0.99 percent, to 3,050.53.
Many U.S. retailers posted better-than-expected sales gains in August at stores open at least a year, boosted by back-to-school buying and setting the stage for a strong third quarter.
Despite the August sales results, the Morgan Stanley retail index <.MVR> dipped 0.4 percent as it was weighed down by a drop in Sears Holdings Corp .
S&P Dow Jones Indices LLC said it will replace Sears with chemical maker LyondellBasell Industries NV in the S&P 500 after the close of trading on September 4. Sears dropped 7.6 percent to $53.10 while LyondellBasell gained 3.8 percent to $48.66.
Economic data showed consumer spending enjoyed its biggest rise in five months while the number of Americans filing new claims for jobless benefits held steady last week.
Pandora Media Inc surged 21.4 percent to $12.24 a day after reporting adjusted second-quarter earnings that beat expectations and raising its full-year outlook.
(Editing by Kenneth Barry)