NEW YORK (AP) -- A record-breaking rally in stocks paused Monday as investors assessed whether the rise in stock valuations overstated the recent improvement in the economy.
The latest positive data, out Monday, showed that Americans increased spending at retailers last month. That suggests that consumers may boost economic growth in the current quarter ending June 30. Still, that wasn't enough to lift shares.
"What we have seen is a huge rally, and there aren't any stones unturned at this point," said Alec Young, global equity strategist at S&P Capital IQ. "You reach a point where investors aren't willing to bid things up any more."
Stocks have surged this year, boosted by an improving economy, Federal Reserve stimulus and record corporate earnings. Signs that the housing market is reviving are also supporting stocks. The Dow Jones industrial average and the Standard and Poor's 500 index both closed at record highs Friday.
Retail sales increased 0.1 percent in April from March, the Commerce Department said Monday. That's an improvement from the 0.5 percent decline in March, which was the largest drop in nine months. Economists had forecast that sales declined by 0.3 percent.
Consumer sentiment is improving as the housing market recovers, which is giving people the confidence to spend more, said Doug Cote, chief market strategist at ING Investment Management.
"If housing continues its upward trajectory, the animal spirits of the consumer will continue to be bolstered," said Cote.
On Monday, stocks started lower before paring some of those losses throughout the day.
The Dow fell 26.81 points, or 0.2 percent, to 15,091.68. The S&P 500 index was little changed at 1,633.77. The Dow is up 15.2 percent this year, and the S&P 500 is 14.6 percent higher.
Telecommunications companies dropped the most of any industry group in the S&P 500 index, falling 0.83 percent. Health care companies advanced the most, rising 0.7 percent.
Health care companies have risen 21.4 percent this year, the most of any of the 10 industry groups in the S&P 500. Investors have been buying the stocks because they offer some growth prospects and also pay large dividends.
More than 90 percent of companies in the S&P 500 have reported earnings for the first quarter, and corporate earnings are projected to grow by an average of 5 percent for the period, according to data from S&P Capital IQ. Earnings growth is projected to slow to 3.7 percent in the second quarter before climbing again in the second half of the year.
That strong earnings outlook for the end of the year means that stocks will likely end 2013 strongly, said Ron Sloan, a senior portfolio manager at Invesco. In the immediate future though, the direction of stocks is less certain, he said.
"The trick is what happens between here to there?" said Sloan. "I'm afraid that we are going to have to give back some of what we've made this year."
Among stocks making big moves:
— Yum Brands fell $1.44, or 2 percent, to $68.92 after the owner of Kentucky Fried Chicken reported that sales in China fell 29 percent last month, driven by concerns about Avian flu.
— Theravance, a biopharmaceutical company, surged $6.26, or 18 percent, to $41.20. Irish drugmaker Elan Corp. plans to pay $1 billion for the right to future royalties from respiratory treatments being developed by Theravance and GlaxoSmithKline.
— Autozone, a retailer of spare parts for cars, fell $5.19, or 1.2 percent, to $415.76 after Deutsche Bank cut its recommendation on the stock from "buy" to "hold."
In government bond trading, the yield on the 10-year Treasury note rose to 1.92 percent from 1.90 percent. The yield, which moves opposite to the price, has jumped this month as investors sold Treasurys and moved into riskier assets.
The Nasdaq composite rose 2.21 points, 0.1 percent, to 3,438.79.
Oil fell 87 cents, or 0.9 percent, to $95.17 a barrel. Gold dropped $2.30, or 0.2 percent, to $1,434.30 an ounce. The U.S. dollar was little changed against the Japanese yen at 101.83 and gained against the euro.