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* Rail strike averted after unions secure tentative deal
* Retail sales post unexpected gain
* Weekly jobless claims edge lower
* Adobe slides on Figma buyout deal
* Indexes down: Dow 0.07%, S&P 0.68%, Nasdaq 1.05% (New throughout, adds NEW YORK dateline, changes byline)
By Stephen Culp
NEW YORK, Sept 15 (Reuters) - Wall Street edged lower on Thursday after a raft of economic data failed to alter the expected course of aggressive moves by the Federal Reserve to contain inflation.
The benchmark S&P 500 index reversed earlier gains, testing a closely watched support level, while declining shares of market leaders Microsoft Corp and Apple Inc hit the tech-laden Nasdaq harder.
Interest rate-sensitive banks helped minimize the blue-chip Dow's decline.
"It's been a difficult year and investors are wary," said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. "Until something changes the tie’s going to go the runner and that’s been the bear."
A mixed bag of economic data, led by better-than-expected retail sales, cemented the likelihood of another 75 basis-point interest rate hike from the Fed at the conclusion of next week's monetary policy meeting, as uncertainties simmered over where the central bank will go from there.
"The Fed has communicated pretty well that they were going to front-end load their hikes," Keator added. "(But) after three 75 basis-point hikes, how much more front-end loading can we expect?"
While the retail print surprised to the upside, declining jobless claims reaffirmed the labor market's strength, and a drop in import prices supported the past-peak inflation narrative.
But a surprise drop in industrial production and a contraction of Atlantic region manufacturing provided fodder for economic pessimists.
None of the data appeared to change the calculus regarding Fed expectations. Financial markets have now fully priced in an interest rate increase of at least 75 basis points next Wednesday, with a one-in-five chance of a super-sized, 100-basis-point hike, according to CME's FedWatch tool.
U.S. railroads remained open after the Biden administration helped broker a tentative deal with unions to avert a strike, thereby avoiding a rail shutdown which would add to supply-chain pressures at the core of hot inflation.
At 2:17PM EDT, the Dow Jones Industrial Average fell 21.01 points, or 0.07%, to 31,114.08, the S&P 500 lost 26.82 points, or 0.68%, to 3,919.19 and the Nasdaq Composite dropped 122.80 points, or 1.05%, to 11,596.88.
Of the 11 major sectors of the S&P 500, utilities were suffering the biggest percentage drop, while healthcare led the gainers, boosted by health insurer Humana Inc's strong earnings forecast.
Banks, which tend to benefit from a rising rate environment, advanced 2.3%.
Railroad operators Union Pacific and Norfolk Southern gained 1.9% and 1.1% respectively, but peer CSX Corp slipped 2.4% following its announcement of Chief Executive Officer James Foote's impending retirement.
Adobe Inc tumbled 17.0% after the company said it would buy Figma in a cash-and-stock deal that valued the online design startup at about $20 billion.
Declining issues outnumbered advancing ones on the NYSE by a 1.93-to-1 ratio; on Nasdaq, a 1.09-to-1 ratio favored decliners.
The S&P 500 posted no new 52-week highs and 12 new lows; the Nasdaq Composite recorded 10 new highs and 148 new lows. (Reporting by Stephen Culp in New York Additional reporting by Ankika Biswas in Bengaluru Editing by Maju Samuel and Matthew Lewis)