Stocks fell on Monday, marking the first setback since the latest round of stimulus policy from the Federal Reserve drove major U.S. indexes to multi-year highs last week.
The Dow Jones industrial average closed at 13,553.10, down 40.27 points or 0.3 per cent, ending a streak of four straight days of gains. The broader S&P 500 closed at 1461.19, down 4.58 points or 0.3 per cent. In Canada, the S&P/TSX composite index closed at 12,446.86, down 52.61 points or 0.4 per cent.
Stocks had been on an impressive winning streak, with the S&P 500 last week touching its highest level since the end of 2007. On Thursday, investors welcomed efforts by the Fed to boost U.S. economic activity with an open-ended commitment to bond-buying, among other stimulus efforts.
With a new week, though, come new concerns.
European ministers were unable to agree on a timeline for building a more unified banking sector, which is seen as a next step in forming a better economic union among member states.
As well, the tensions between China and Japan over disputed islands now held by the Japanese are on the rise. There were reports of widespread demonstrations in China against the Japanese, and now Chinese fishing boats are apparently making their way to the islands, raising the chances of conflict between the two economic power houses.
In the United States, the focus shifted away from Fed attempts to boost economic activity to the activity itself: The Empire State manufacturing survey for the New York region contracted the most since April 2009, coming in worse than what economists had been expecting.
Rona Inc. slumped 11.6 per cent after Lowe's Cos. Inc. withdrew its proposal to buy the Quebec-based home improvement retailer for $14.50 a share. The shares closed in Toronto at $11.29.
Apple Inc. rose 1.2 per cent – closely approaching a new record high of $700 (U.S.) a share – after it reported 2 million pre-orders for the new version of its upcoming iPhone, exceeding the initial supply. Apple did hit the $700 level in post-market trading.
Generally, though, economically sensitive stocks were the hardest hit – a switch from last week when investors seemed to be rotating into cyclical stocks and away from defensives. Alcoa Inc. and Bank of America Corp. fell 2.6 per cent each. Boeing Co. fell 1.9 per cent.
Crude oil prices swung wildly in afternoon trading amid rumours that the United States was about to release oil from its reserves to combat rising prices. In New York, it ended the day at $96.62 a barrel, down $2.38, after sliding below $95 earlier in a sudden price-drop.
Among Canadian energy producers, Suncor Energy Inc. fell 0.9 per cent and Canadian Natural Resources Ltd. fell 1.6 per cent.
David Berman