Stocks slide in cautious trading after rally

NEW YORK -- Investors moved more money out of stocks Friday, further chilling the market's spring rally.

Stocks extended the week's losses as traders accustomed to economic news being "less bad" found little incentive to buy.

The Labor Department said consumer prices in April were flat, as economists predicted. And manufacturing activity in the New York area and industrial production contracted less than economists expected. They also shrank significantly less than they did earlier in the year, fitting a trend seen in most data since early March: that the economy continues to slide, but at a slower pace.

A Reuters/University of Michigan index of consumer sentiment rose to an eight-month high in May. The improvement is a good sign as sentiment rebounds from a low in November. Increased confidence could translate to improved consumer spending.

But a drop in the price of oil hit energy companies. Financial stocks also fell as investors worried about the economic recovery being further out than hoped.

Wall Street's huge spring rally has hit a lull. The government's stress tests of banks are done, earnings reports are winding down and the first wave of April economic data have been released. Investors are growing concerned that perhaps they became too optimistic when they saw signs of the economy bottoming.

"We've gotten through the panic point, and what will get us to the next level is seeing the economy actually grow. It'll happen, but it's a matter of when," said Douglas Kreps, managing director at Fort Pitt Capital Group.

According to preliminary calculations, the Dow Jones industrial average fell 62.68, or 0.8 percent, to 8,268.64. The broader Standard & Poor's 500 index fell 10.19, or 1.1 percent, to 882.88, and the Nasdaq composite index fell 9.07, or 0.5 percent, to 1,680.14.