8-26-13 4:27 PM EDT | Email Article
 

By Kate Gibson and Wallace Witkowski, MarketWatch

 

NEW YORK (MarketWatch) -- U.S. stocks closed lower in light volume Monday after Secretary of State John Kerry called Syria's actions 'inexcusable' and a report said the U.S. would hit its debt limit in October.

 

Stocks had been modestly higher after a downbeat U.S. economic report did little to change the belief that the Federal Reserve would likely tighten monetary policy in September.

 

"The market is trying to build in ahead of time" the consensus view that the central bank would begin cutting back on its $85 billion in monthly bond purchases next month, and if not then, in December, Randy Frederick, managing director of active trading and derivatives at Charles Schwab, said of Wall Street's pullback the past three weeks.

 

Stock indexes fell to session lows after Kerry told a nationally televised news conference that the United States would hold Syria's government accountable for using chemical weapons. "By any standard it is inexcusable," said Kerry of last week's attack that the Syrian opposition said killed more than 1,300 people.

 

After rising as much as 39 points and falling 65, the Dow Jones Industrial Average (DJI) finished at 14,946.46, down 64.05 points, or 0.4%. The S&P 500 index (SPX) shed 6.72 points, or 0.4%, to 1,656.78, with telecommunications the worst performing and health care faring best of its 10 major sectors. The Nasdaq Composite (RIXF) was off a fraction at 3,657.57.

 

Decliners pulled ahead of advancers on the New York Stock Exchange, where 545 million shares traded. Composite volume surpassed 2.4 billion, or less than 80% of the past month's average volume.

 

Treasury prices rose, with the yield on the 10-year note (10_YEAR) falling 3 basis points to 2.788%.

 

The Wall Street Journal cited sources in reporting Monday afternoon that the U.S. government would hit the debt limit in mid-October, a more precise estimate than provided in the past.

 

With the next Federal Open Market Committee meeting in mid-September and sabre-rattling over Syria, Mark Luschini, chief investment strategist at Janney Montgomery Scott called a selloff based solely on the debt-ceiling news -- which has been known about for a while --"misguided," given there's so much more to worry about before then.

 

"It seems to be a bit of an overreaction because it's so far away," said Luschini. "With Congress away, I would have expected the rhetoric to intensify and give the market something to bite on."

 

'Really awful' durables report

 

The market's early action was set by a report on big-ticket items. Orders for U.S. durable goods fell more than expected last month, down 7.3% in the largest drop in nearly a year. The decline in bookings for goods intended to last at least three years is the biggest drop since August 2012 after a 3.9% rise in June, the Commerce Department said.

 

Data showing a steep drop in orders for U.S. factory goods were "really awful," Frederick of Schwab added.

 

Trading volume is extraordinarily low, so what had been tepid climb could also be explained by some bargain hunting by "a few institutional investors," Frederick said.

 

Investors are looking at reports on the economy with a less-than-straight-forward view, given improvement is likely to bring on reduced monetary easing by the Federal Reserve sooner rather than later.

 

The central bank is expected to begin cutting its $85 billion in monthly bond purchases before the end of the year, with the market currently debating whether the move would begin in September or December.

 

"The August market-correction has been driven by tapering fear and higher interest rates. It appears to us that tapering is now almost fully discounted, while Treasury yields may have reached a ceiling," noted William Riegel, head of equity investment, and Lisa Black, head of global public fixed-income markets, at TIAA-CREF, in emailed commentary.

 

Biotechnology-firm Amgen Inc. (AMGN) rallied 7.7% a day after the drug maker agreed to buy Onyx Pharmaceuticals Inc. (ONXX) for about $10.4 billion to gain access to its three cancer drugs. Shares of Onyx Pharmaceuticals were up 5.6%.

 

The dollar(DXY) gained against the currencies of U.S. trading partners, including the euro (EURUSD) .

 

After rising 1.9% last week, gold futures for December delivery (GCZ3) lost $2.70, or 0.2%, to settle at $1,393.10 an ounce. Gold rose above $1,403 in electronic trade as stocks turned lower.

 

The price of oil fell, with crude futures for October delivery (CLV3) off 50 cents, or 0.5%, at $105.92 a barrel.

 

Up more than 14% on the year and down 3.6% in August, the Dow industrials on Friday marked a third consecutive weekly drop, the longest weekly losing streak since mid-November 2012. Both the S&P 500 and Nasdaq Composite gained last week, with the former off 1.7% in August but up 16% for the year and the latter up 0.9% for the month and 21% year-to-date.

-Kate Gibson; 415-439-6400; AskNewswires@dowjones.com

 

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


(END) Dow Jones Newswires

08-26-13 1627ET

Copyright (c) 2013 Dow Jones & Company, Inc.
Copyright 2014 MarketWatch
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