Wall Street slips as investors stay cautious

NEW YORK (Reuters) - Wall Street edged lower on Wednesday as uncertainties over Europe's finances and tepid U.S. economic data gave investors little reason to make any decisive move after a sharp snap-back rally.

Traders called the environment opaque and are worried about getting caught on the wrong side of what could be a sharp swing in the market. Investors are on guard ahead of the upcoming weekend elections in Greece, whose outcome have the potential to put Greece on course to exit the euro zone, and next week's policy meeting of the Federal Reserve.

Stocks traded within a narrow band on Wednesday after moving in a wide and volatile trading range earlier this week but were almost unchanged on Friday's close.

There was a defensive tilt to trading as gains in sectors such as healthcare and telecoms offset declines in cyclical sectors such as materials. Shares in telecom provider AT&T hit a 52-week high at $35.06.

Michael James, a senior trader at Wedbush Morgan in Los Angeles, said the potential for landmark events in the Greek elections over the weekend and the Fed's policy meeting next Tuesday and Wednesday were driving a wait-and-see approach.

"I think a fair amount of it is positioning ahead of Chairman Bernanke's comments and any potential Fed stimulus announcement, along with a fair amount of uncertainty and people squaring positions and taking some shorts off ahead of the Greek elections," he said.

Shares of JPMorgan Chase & Co were a standout, jumping 2.5 percent as the bank's chief executive, Jamie Dimon, defended the portfolio behind JPMorgan's recent multibillion-dollar trading loss, telling lawmakers it was a genuine hedge that would make the firm a lot of money if a credit crisis hit.

The Dow Jones industrial average <.DJI> dropped 19.18 points, or 0.15 percent, to 12,554.62. The Standard & Poor's 500 Index <.SPX> fell 1.88 points, or 0.14 percent, to 1,322.30. The Nasdaq Composite Index <.IXIC> lost 4.92 points, or 0.17 percent, to 2,838.15.

Greece elections are scheduled for Sunday, and investors fear the outcome could mean the country embarks on a potentially destabilizing exit from the euro zone. European closed <.FTEU3> closed down 0.3 percent.

Also weighing on the market, retail sales, excluding autos, fell in May to their worst level in two years, the latest data to point to sluggish U.S. growth. The S&P Retail Index <.RLX> lost 0.7 percent.

Recent U.S. economic data, most notably the May payroll report, has pointed to sluggish domestic growth, a worrying development for investors.

The S&P 500 moved more than 1 percent in opposite direction on the past two trading days, which were largely dictated by the events in the euro zone.

On Tuesday the index bounced after falling toward the 1,300 level, a psychological milestone that some traders are using to trade against as index levels assume more importance given the lack of a clear outlook.

Investors have pushed Spain's 10-year borrowing costs to their highest level since the launch of the euro in 1999, adding to uncertainty over the plan to bail out the country's struggling banks.

"We don't know what the result of the bailout will be, nor the outcome of the elections, and that uncertainty is really preventing us from rallying or from selling off," said Randy Frederick, director of trading and derivatives for Charles Schwab in Austin, Texas. "It has become very difficult to know how the market will react to anything."

Dell Inc , the No. 2 U.S. PC maker, said it aims to raise its target on dividends and share buybacks to 20 to 35 percent of free cash flow, saying its corporate software and services business is on track to grow by an average of 10 percent annually until 2016. Its shares advanced 3.6 percent to $12.39.

An influential government adviser in China was quoted as saying the country's economic growth could fall below 7 percent in the second quarter if weak activity persists in June.

Investors have been looking to China's relatively robust expansion to pick up the slack from Europe, especially demand for commodities.

Also on Wednesday, shares of Celgene Corp rose 1.2 percent to $64.84 after the biotechnology company authorized a stock buyback program of $2.5 billion.

(Editing by Leslie Adler)

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