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Morgan Stanley ( MS ) up after higher Q4 profits

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UnitedHealth ( UNH ) falls on missing quarterly sales estimates

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Investors parse retail sales, jobless claims data

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Indexes off: Dow 0.2%, S&P 500 0.16%, Nasdaq 0.59%

(Updates to afternoon U.S. trading)

By Chuck Mikolajczak

NEW YORK, Jan 16 (Reuters) - U.S. stocks were modestly

lower on Thursday, swaying between slight gains and declines

after a jump in the prior session, as investors eyed the most

recent corporate earnings and gauged economic data to determine

the path of Federal Reserve rate cuts.

A benign reading on inflation calmed fears about a renewal

in price pressures and strong bank earnings helped the three

major U.S. indexes notch their biggest one-day percentage gain

since Nov. 6 on Wednesday.

Economic data on Thursday indicated consumer spending

remains strong, while the labor market is also on solid footing,

given the Fed's cushion to keep a slow pace in cutting interest

rates this year.

"The market breathed a pretty good sigh of relief

yesterday. Now January's undecided, but at least on a little bit

better footing to see where we end up, and we can look at some

more data and some earnings and see how that's all going to turn

out," said Rick Pitcairn, chief global strategist at

Philadelphia-based Pitcairn.

"On the other positive side of this market, the bank

earnings have been strong, and those are bellwether earnings,

and to the extent that you've got a steepening yield curve,

you've got some strong earnings come out of the banks, they're

looking forward and not talking their numbers down. The market's

taken a little courage from that."

Morgan Stanley ( MS ) advanced 2.73% after the lender said

earnings increased in the fourth quarter, propelled by a wave of

dealmaking, while Bank of America ( BAC ) lost 1.93%. The

country's second-largest bank predicted higher interest income

in 2025.

The Dow Jones Industrial Average fell 84.62

points, or 0.20%, to 43,134.15, the S&P 500 lost 9.53

points, or 0.16%, to 5,940.38 and the Nasdaq Composite

lost 114.09 points, or 0.59%, to 19,396.71.

Investors also focused on comments from Fed Governor

Christopher Waller, who said the central bank could cut rates

sooner and faster than expected as inflation is likely to

continue to ease, which helped push Treasury yields lower.

The yield on the 10-year Treasury note was last

down 5.9 basis points (bps) to 4.594% and rate futures were

pricing in a greater chance for a rate cut of at least 25 basis

points to come at the Fed's May meeting.

Stocks have struggled following a post-U.S. election rally,

with the S&P 500 falling in four of the previous five weeks. A

resilient economy, nagging inflation and comments from Federal

Reserve policymakers have fanned worries about the central bank

being less aggressive in cutting interest rates than previously

anticipated.

Concerns linger about potential tariffs from

President-elect Donald Trump, scheduled to take office on

Monday, that would further stoke inflation.

Trump's pick for Treasury Secretary, Scott Bessent, said the

dollar should remain the world's reserve currency, the Federal

Reserve should stay independent, and that he is ready to impose

tougher sanctions on Russia's oil sector, while warning of an

"economic calamity" if Trump's 2017 tax cuts expired at the end

of this year.

UnitedHealth ( UNH ), down 5.45%, weighed on the Dow after

the health insurer reported fourth-quarter revenue below

estimates.

Advancing issues outnumbered decliners by a 1.68-to-1 ratio

on the NYSE and by a 1.04-to-1 ratio on the Nasdaq.

The S&P 500 posted 19 new 52-week highs and nine new lows,

while the Nasdaq Composite recorded 56 new highs and 93 new

lows.