* Overseas data weak, but U.S. manufacturing gains
* Banks, materials may see biggest hit on sequester
* Groupon rallies after chief executive exits
* Indexes down: Dow 0.3 pct, S&P 0.4 pct, Nasdaq 0.6 pct
By Ryan Vlastelica
NEW YORK, March 1 (Reuters) - U.S. stocks fell on Friday,
beginning March on a weak footing, as lackluster data in the
U.S. and abroad pointed to a world economic recovery that
struggles to gain traction.
While Wall Street rebounded off its lows of the session
following an encouraging read on manufacturing, the benchmark
S&P 500 remained on track to close out its worst week this year
January personal income fell 3.6 percent in the U.S., its
biggest drop in 20 years.
China's factory growth cooled to multi-month lows in
February as domestic demand dipped, and euro zone manufacturing
activity appeared no closer to recovery last month, as a dire
performance in France offset a return to growth in Germany.
"The weakness overseas really spooked things, and that's
what's directing the ball right now," said Bill Stone, chief
investment strategist at PNC Wealth Management in Philadelphia.
There were some bright spots, too, as new orders drove the
pace of U.S. manufacturing growth to its quickest in more than a
year and a half in February, according to the Institute for
In addition, U.S. consumer sentiment rose more than expected
in February, the final Thomson Reuters/University of Michigan
sentiment index showed.
Investors were also looking ahead to U.S. government budget
cuts that were widely expected to take effect at the end of the
day, barring an unlikely last-minute deal. The International
Monetary Fund has said that if the cuts take effect, it would
reevaluate growth forecasts for the U.S.
The Dow Jones industrial average was down 44.93
points, or 0.32 percent, at 14,009.56. The Standard & Poor's 500
Index was down 6.20 points, or 0.41 percent, at 1,508.48.
The Nasdaq Composite Index was down 17.89 points, or
0.57 percent, at 3,142.30.
For the week, the Dow is up less than 0.1 percent while the
Nasdaq is off 0.6 percent and the S&P is off 0.4 percent in its
worst weekly performance this year.
Equities have been on a tear lately, rising for four
straight months to approach five-year highs, while the Dow is
now about 1 percent away from its all-time intraday high of
14,198.10. Declines have been shallow or short-lived, with
investors jumping in to seek value on any dips.
In addition to concerns about economic growth, "there are
also jitters with the Dow at the doorstep of all-time highs,"
said PNC's Stone, who helps oversee $115 billion in assets.
"Given the speed of the advance we've seen, there's plenty of
room for a pullback."
The equity market gains have come on the back of strong
corporate earnings and an accommodative Federal Reserve. In that
environment, many investors have shrugged off the potential
impact of the sequester, $85 billion in spending cuts across
federal government agencies that economists expect will shave
half a percentage point off U.S. economic growth.
Cyclical companies such as banks and materials stocks, which
are closely tied to the pace of economic growth, are likely to
be among the hardest hit in the short term. Morgan Stanley
fell 0.8 percent to $22.37. Chevron Corp slid 0.7
percent to $116.32.
Groupon Inc surged 4 percent to $4.71, a day after
the online coupon company fired its chief executive officer in
the wake of weak quarterly results.
Gap Inc rose 3.1 percent to $33.97 after reporting
fourth-quarter earnings that beat expectations and boosting its
dividend by 20 percent, while Salesforce.com Inc posted
sales that beat forecasts, sending shares up 5.9 percent to