US STOCKS-Wall St slips; banks fall with prospect of rate cut, energy drops

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* U.S. consumer prices barely rise in May
* Energy leads sector declines
* Indexes off: Dow 0.2%, S&P 0.2%, Nasdaq 0.4%

(Updates to late afternoon)
By Caroline Valetkevitch
NEW YORK, June 12 (Reuters) - Wall Street ended down
slightly on Wednesday, with bank stocks declining as prospects
of a U.S. interest rate cut rose and energy shares tumbling
along with oil prices.
The S&P 500 energy index .SPNY slid 1.4%, the most among
the 11 S&P sectors, as demand worries drove U.S. crude prices
down 4%. The day's losses made energy the worst-performing S&P
500 sector for the year-to-date.
A report from the Labor Department showed U.S. consumer
prices rose 0.1% in May, in line with expectations of economists
polled by Reuters, pointing to moderate inflation. backed the case for a rate cut by the Federal Reserve.
Banking stocks .SPXBK , which tend to benefit from higher
interest rates, dropped 1.4%. The broader financial sector
.SPSY fell 1%.
Still, hopes that the Fed will act to counter a slowing
global economy due to the escalating trade war with China have
spurred a rally in stocks this month. The S&P 500 index .SPX
is up 4.6% so far in June.
Fed policymakers will meet on June 18-19. Markets have
priced in at least two rate cuts by the end of 2019. Fed fund
futures FEDWATCH imply around an 80% chance of an easing in
rates as soon as July.
Investors are reducing exposure to stocks after the recent
rally and as they brace for the Fed meeting.
"People don't want to be too far over their skis going into
next week," said Michael James, managing director of equity
trading at Wedbush Securities in Los Angeles.
The Dow Jones Industrial Average .DJI fell 43.68 points,
or 0.17%, to 26,004.83, the S&P 500 .SPX lost 5.88 points, or
0.20%, to 2,879.84 and the Nasdaq Composite .IXIC dropped
29.85 points, or 0.38%, to 7,792.72.
S&P 500 utilities .SPLRCU , which are positively affected
by falling rates, was the day's best-peforming sector, rising
1.3%.
Lingering worries on the trade front weighed on sentiment, a
day after President Donald Trump said he was holding up a deal
with China and had no interest in moving ahead unless Beijing
agrees to four or five major points. Less than three weeks before proposed talks between the
United States and Chinese leaders, sources say there has been
little preparation. Trump said a deal could be
reached, but again threatened to increase tariffs on Chinese
goods unless that happens. Semiconductor stocks, which get sizeable revenue from China,
declined on Wednesday. The Philadelphia Semiconductor index
.SOX dropped 2.3%. Micron Technology Inc MU.O , Applied
Materials Inc AMAT.O and Lam Research Corp LRCX.O dropped
more than 5% each.
Facebook Inc FB.O shares declined 1.7% after the Wall
Street Journal reported the social media giant uncovered emails
possibly connecting Chief Executive Officer Mark Zuckerberg to
potentially problematic privacy practices. Declining issues outnumbered advancing ones on the NYSE by a
1.20-to-1 ratio; on Nasdaq, a 1.07-to-1 ratio favored decliners.
The S&P 500 posted 24 new 52-week highs and 2 new lows; the
Nasdaq Composite recorded 41 new highs and 104 new lows.
Volume on U.S. exchanges was 5.98 billion shares, compared
to the 6.88 billion average for the full session over the last
20 trading days.