With traders cashing in on last week's Federal Reserve-inspired rally on Wall Street, stocks moved mostly lower during trading on Monday. Selling pressure remained relatively subdued, however, limiting the downside for the markets.
The major averages regained some ground going into the close but still ended the day in the red. The Dow fell 40.27 points or 0.3 percent to 13,553.10, the Nasdaq edged down 5.28 points or 0.2 percent to 3,178.67 and the S&P 500 slipped 4.58 points or 0.3 percent to 1,461.19.
Profit taking contributed to the weakness on Wall Street, which came after recent gains lifted the major averages to multi-year highs.
The Dow and the S&P 500 both ended Friday's trading at their best closing levels in well over four years, while the tech-heavy Nasdaq reached a nearly twelve-year closing high.
Last week's rally came on the heels of the Federal Reserve's announcement of its plans to launch a third round of quantitative easing as part of an effort to boost the sluggish economy.
The Fed said it would purchase additional agency mortgage-backed securities at a pace of $40 billion per month, adding that it will continue the purchases until the outlook for the labor market improves substantially.
Disappointing manufacturing data also helped to drag stocks lower, with a report from the New York Federal Reserve showing that conditions for New York manufacturers have deteriorated at an accelerated rate in the month of September.
The New York Fed said its general business conditions index fell to a negative 10.41 in September from a negative 5.85 in August, with a negative reading indicating a contraction in regional manufacturing activity. Economists had been expecting the index to climb to a negative 2.0.
James Knightley, senior economist at ING, said, "This is the weakest reading since April 2009 and will heighten fears that the U.S. manufacturing sector is returning to recession."
In corporate news, shares of Lowe's (LOW) closed moderately lower after the home improvement retailer announced that it has withdrawn its offer to acquire Canadian rival Rona for C$14.50 per share in cash.
Overseas, stock markets across the Asia-Pacific region turned in a mixed performance on Monday, with the Japanese markets closed for a public holiday. Australia's All Ordinaries Index rose by 0.3 percent, while China's Shanghai Composite Index tumbled by 2.1 percent.
Meanwhile, the major European markets all moved back the downside on the day. While the German DAX Index edged down by 0.1 percent, the U.K.'s FTSE 100 Index fell by 0.4 percent and the French CAC 40 Index slid 0.8 percent.
In the bond market, treasuries regained some ground after trending lower in recent sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.2 basis points to 1.838 percent.
After moving sharply higher in recent sessions, steel stocks showed a notable move back to the downside on the day. The NYSE Arca Steel Index fell by 3 percent after ending the previous session at a four-month closing high.
Cliffs Natural Resources (CLF) helped to lead the steel sector lower, falling by 7 percent after J.P. Morgan downgraded its rating on the stock to Neutral from Overweight.
Significant weakness was also visible among housing stocks, as reflected by the 2.2 percent loss posted by the Philadelphia Housing Sector Index. The loss by the index came after it reached a nearly five-year closing high last Friday.
Financial stocks also came under pressure on the day, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index both falling by 1.7 percent.
Electronic storage, transportation, and oil service stocks also notable losses, with the weakness among oil service stocks coming as the price of crude oil fell by more than $2 a barrel.
The economic calendar for Tuesday remains relatively light, although traders are likely to keep an eye on a report on homebuilder confidence in September.
Trading could also be impacted by reaction to comments by a pair of Federal Reserve officials, with Chicago Fed President Charles Evans and New York Fed President William Dudley both due to speak.
Richmond Fed President Jeffrey Lacker, who opposed the central bank's third round of quantitative easing, is scheduled to deliver remarks after the close of trading on Tuesday.
by RTT Staff Writer
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