By Sruthi Shankar
(Reuters) - U.S. stocks edged lower on Thursday after Federal Reserve Chairman Jerome Powell said the central bank would continue unwinding its balance sheet, adding to weakness in the markets under pressure from a retail selloff.
While Powell reiterated the views of other policymakers that the Fed would be patient about interest rate hikes, he said the bank's balance sheet would be "substantially smaller" and raised concerns about the size of U.S. debt.
"He reiterated his statements that helped the market a few days ago which was that the Fed is not on a preset course to hike rate," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin.
"But he also made a statement about the amount of budget deficit and the national debt rising and that's what spooked the market a little bit. It's more of a commentary on the entire economy as a whole."
The S&P 500 <.SPX> is on track to end a four-day rally, which was sparked by a strong U.S. jobs data, easing fears of higher interest rates and rising hopes of a trade deal.
However, trade-related optimism faded on Thursday as China offered little details on key issues such as forced technology transfers, intellectual property rights, tariff barriers and cyber attacks.
The lack of clarity, coupled with weak economic data in China and France, rekindled worries about global growth.
Closer home, reports from Macy's and American Airlines added to fears of corporate profit growth shrinking, which was exacerbated after Apple's sales warning last week.
"Most of what's driving the pullback is headline risks on the lack of a formal trade policy deal," said Matt Forester, chief investment officer at BNY Mellon's Lockwood Advisors in King of Prussia, PA.
"We're about to go into the earnings season and it's going to be a tug of war between relatively good results versus what the forward guidance is going to look like."
The report, along with that of Kohl's Corp
At 1:48 p.m. ET the Dow Jones Industrial Average <.DJI> was down 38.89 points, or 0.16 percent, at 23,840.23, the S&P 500 <.SPX> was down 6.66 points, or 0.26 percent, at 2,578.30 and the Nasdaq Composite <.IXIC> was down 25.05 points, or 0.36 percent, at 6,932.02.
American Airlines Group Inc
Declining issues outnumbered advancers for a 1.22-to-1 ratio on the NYSE and for a 1.42-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week highs and one new low, while the Nasdaq recorded 17 new highs and 9 new lows.