* Fed official says could ease QE3 by summer
* Tesla to raise $830 mln, stock resumes surge
* Wal-Mart falls after earnings miss
* Dow down 0.3 pct; S&P 500 down 0.5 pct; Nasdaq down 0.2
By Leah Schnurr
NEW YORK, May 16 (Reuters) - U.S. stocks fell on Thursday,
with the downturn accelerating late in the day after a Federal
Reserve official said the central bank could begin easing up on
its monetary stimulus this summer.
The three major U.S. stock indexes had earlier traded in a
tight range, supported by a gain of more than 12 percent in
Cisco Systems shares and as investors took in a batch
of economic data that pointed to slower growth.
But the S&P 500 finished near its session low following the
comments from John Williams, the president of the Federal
Reserve Bank of San Francisco, who also said the Fed could end
its bond purchases later this year, assuming the labor market
continues to grow stronger. Williams is not a
voter on the Fed's policy-setting panel this year.
"When a Fed governor is out there and mentions this
possibility, it does spook the market a little because I don't
think anybody quite knows how the stock market is going to react
once (the stimulus) is taken away," said Tim Ghriskey, chief
investment officer of Solaris Group in Bedford Hills, New York.
The Fed's purchases of $85 billion a month in bonds has been
a significant driver of the rally in equities that has taken
indexes to record highs and pushed the S&P 500 up nearly 16
percent this year.
Analysts also said the comments could have been viewed as a
reason to take a pause after such a strong run-up in stocks.
"It turned a boring day into a bit of profit taking,"
The Dow Jones industrial average dropped 42.47
points, or 0.28 percent, to 15,233.22 at the close. The Standard
& Poor's 500 Index fell 8.31 points, or 0.50 percent, to
end at 1,650.47. The Nasdaq Composite Index slipped 6.37
points, or 0.18 percent, to finish at 3,465.24.
Earlier, the Dow reached a fresh all-time intraday high at
The Nasdaq fared better than the other two major indexes as
Cisco shot up 12.6 percent at $23.89 after the network equipment
maker posted a higher-than-expected quarterly profit and said
current-quarter revenue could increase.
Economic data had set a lackluster tone in markets early in
the day as factory activity in the mid-Atlantic region
contracted, while U.S. housing starts plummeted 16.5 percent in
April. New claims for jobless benefits unexpectedly jumped last
However, investors had speculated that soft underlying
inflation also means the Fed has room to continue its economic
Wal-Mart Stores Inc fell 1.7 percent to $78.50 and
dragged on the Dow after the world's largest retailer posted a
quarterly profit that missed expectations, with sales down 1.4
percent at U.S. stores open at least a year.
Tesla Motors Inc shares gained 8.7 percent to
$92.25 after the electric carmaker said it aims to raise $830
million through a stock-and-debt offering that will be used to
repay its U.S. Department of Energy loans with interest. The
stock has surged more than 50 percent since the company reported
earnings last week.