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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

(Updates to U.S. market close)

By Chuck Mikolajczak

NEW YORK, Jan 16 (Reuters) - U.S. stocks dipped on

Thursday as a jump in the prior session cooled, while 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.

"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 after the lender said

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

dealmaking, while Bank of America ( BAC ) shares declined. The

country's second-largest bank predicted higher interest income

in 2025.

According to preliminary data, the S&P 500

lost 12.53 points, or 0.21%, to end at 5,937.53 points,

while the Nasdaq Composite lost 173.32 points, or 0.89%,

to 19,337.92. The Dow Jones Industrial Average fell 65.53

points, or 0.16%, to 43,152.95.

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 about 5 basis points (bps) and rate futures were pricing in

a greater chance for the Fed to cut rates by at least 25 bps at

the central bank'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, but

are on pace currently for a weekly gain. 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 ) fell and weighed heavily on the Dow

after the health insurer reported fourth-quarter revenue below

estimates.